Spending fell in April as economy makes spring rebound

Consumer spending fell unexpectedly in April for the first time in a year as the economy rebounds this spring after months of sluggishness.

Spending, which is closely watched because it represents 70 percent of the economy, dropped 0.1 percent last month, the Commerce Department said Friday.

{mosads}The drop came after March’s 1 percent increase, which was the best showing since August 2009, as consumers released pent-up demand following the cold winter weather. 

A separate report on Thursday showed that spending rose at a 3.1 percent annual rate through the first three months of the year. 

But that strong posting was mostly the result of increased spending on higher utility bills and healthcare, according to a White House analysis.

Meanwhile, spending in the first quarter fell at restaurants and on durable goods such as cars. 

That report on growth showed that the economy shrank 1 percent in the January-March period, the first contraction in three years.

Strong hiring will be needed to maintain consumer spending in the coming months, especially with economists expecting upward of 4 percent annual growth in the April-June quarter.

Meanwhile, incomes rose for the fourth straight month and were up $43.7 billion, or 0.3 percent, in April, after a 0.5 percent, or $44.6 billion, gain in March.

Disposable incomes rose at the slowest pace of the year last month, by 0.2 percent in April, after an adjustment for inflation, compared with an increase of 0.3 percent in the first three months of the year.

Amid the drop in spending, consumers socked away more savings, with that rate increasing to 4 percent from 3.6.

The government’s next jobs report will be released next Friday. 

Employers added 288,000 jobs in April, the strongest figure in more than two years, while the jobless rate dropped, although primarily because fewer people were in the workforce.