Consumer Spending Climbs in April, but Inflation Weighs on Savings Rate
May 26, 2022
American households increased their spending for the fourth consecutive month in April, but the savings rate plummeted to a 14-year low, suggesting that more Americans are dipping into their savings to keep pace with rising prices.
Consumer spending increased by a seasonally adjusted 0.9% last month, according to the Commerce Department, as Americans spent more on cars and meals in restaurants. The savings rate fell to 4.4%, down from a downwardly revised 5% the month before.
While some of this increased spending is due to climbing prices, the Commerce Department’s measure of inflation, the personal consumption expenditures (PCE) index decelerated for the first time since late 2020, though remains near a 40-year high.
The PCE was up 6.3% in April from the year before, down from March’s 6.6% annual increase. Prices rose by a seasonally adjusted 0.2% in April from March, slowing from a 0.9% month-to-month increase in March as energy prices edged down after having surged in March.
When adjusted for inflation, PCE rose 0.7% in April, with durable goods spending up 2.3%, nondurable goods spending up 0.2%, and services spending up 0.5%.
Commerce Department data showed personal income rose a seasonally adjusted 0.4% in April. When adjusted for inflation, disposable income was essentially flat during the month, suggesting that wage increases are struggling to keep pace with rising prices and that consumers are turning to their savings to make purchases.