Americans are spending faster than their income is growing

Prices are rising faster than incomes, leaving consumers under pressure. Personal saving fell sharply to 2.6% in April, the lowest level since mid-2022, as disposable personal income declined while consumer spending increased. The gap between income growth and spending growth is driving the drawdown in savings. Gasoline and energy goods were the largest contributors to April spending increases, reflecting the ongoing energy impact. Inflation cooled in April, with the Fed’s preferred PCE price index rising 0.4% after 0.7% in March. Core PCE rose 0.2% and remained elevated year over year at 3.3%, indicating limited spillover beyond energy but still worsening inflation trends compared with the prior year.

"“While prices are rising faster than comfortable, incomes are not, putting consumers in an uncomfortable spot,” NerdWallet senior economist Elizabeth Renter wrote. “Rising prices, sluggish income and economic uncertainty could set the stage for a broader pullback in consumer spending and therefore economic growth,” Renter added."

"“The personal saving rate fell to 2.6% in April, down from 3.2% in March and 4.3% in January - a sharp slide that brings it to its lowest level since mid-2022.” “That gap between how fast consumer incomes are rising and how quickly they are spending is driving the drawdown in the saving rate.”"

"“Consumer spending rose 0.5%, even as disposable personal income fell 0.1%, the Commerce Department said Thursday morning.” “Gasoline and energy goods were the single-largest driver of spending increases in April, one sign of how the war's energy impact is registering in household budgets.”"

"“The Personal Consumption Expenditures Price Index, the Federal Reserve's preferred inflation gauge, rose 0.4% in April, cooling from 0.7% in March at the height of the energy shock.” “There is still little evidence of the shock spilling over into non-energy-related categories. Core PCE, which excludes food and energy costs, gained 0.2% - cooling slightly from March.”"

Read at Axios