April Personal Income and Spending Growth Slowing

Personal income and spending both rose +.2% MoM. While the growth in spending was as anticipated, the growth in income was a little better than the +.1% MoM increase forecast by consensus estimates for April. The savings rate held steady at +.7%. Within personal income, wages and salaries actually fell -.2% MoM, in reflection of the weakening job market. April saw the largest decline in employee compensation in a year. But disposable income, after taxes, rose +.2% MoM, reflecting the impact of the tax rebate checks. The headline PCE inflation deflator held steady at 3.2%, rather than easing to 3.1% as expected. Core PCE inflation also held steady at +2.1% YoY, with a monthly rise of +.1% MoM. Once adjusted for inflation, disposable income and spending were both unchanged on the month. It appears that slower income growth is restraining spending growth. Both personal spending and income rose +.4% MoM the prior month (March).