US consumer spending falls for the first time in a year
US consumer spending fell in April, for the first time in nearly a year.
The Department of Commerce said consumer spending fell 0.2% in April.
Analysts had expected a rise of 0.1%, which was the change seen in March. Consumer spending accounts for about 70% of US economic activity.
Spending was held back by weaker demand for utilities and less money being spent on petrol, following a fall in the price of fuel. Tax increases may also have hit spending.
An increase in social security payments has reduced the take-home pay of workers. A person earning $50,000 a year has about $1,000 less to spend a year because of the increase in the social security taxes. A household with two highly paid workers has up to $4,500 less.
Also, because petrol prices declined sharply in March and April, the amount of money consumers were spending at fuel stations fell.
Figures showed that household income was unchanged last month, after a 0.3% rise in March and 1.2% gain in February.
A brighter future?
The US economy has also been hit by government spending cuts, which took effect at the beginning of March.
Figures released on Thursday showed that the US economy grew at an annualised rate of 2.4% in the first three months of the year, down slightly from the original estimate of 2.5%.
The rate of growth is expected to slow in the current quarter, because of the impact of federal spending cuts and continuing weakness in the global economy.
However, there could be some relief later in the year.
House prices have risen 11% over the past 12 months, which could spur spending. Some economists contend that for every dollar rise in the value of house prices, consumer spending can rise by as much as 10 cents.
In addition, the slow, but steady, improvement in the employment figures in the US could also provide support to consumer spending. Figures due out next week are expected to show that 165,000 jobs were created in May.