Personal Income And Spending Increase In Line With Estimates, Friday, May 30, 2008 9:04:15 AM

Friday morning, the Department of Commerce released its report on personal income and spending in the month of April, showing modest increases in both income and spending that came in line with economists` expectations.

The report showed that personal income edged up 0.2 percent in April following a revised 0.4 percent increase in March. Economists had expected income to increase by 0.2 percent compared to the 0.3 percent increase originally reported for the previous month.

The modest increase in personal income came even though private wage and salary disbursements decreased by $18.2 billion in April, in contrast to an increase of $26.9 billion in March.

The Commerce Department added that personal spending rose 0.2 percent in April after increasing by 0.4 percent in the previous month. The increase in personal spending also came in line with economist estimates of 0.2 percent growth.

With income and spending increasing at the same pace, personal saving as a percentage of disposable personal income was 0.7 percent in April, unchanged from March.

Additionally, the Commerce Department said its closely watched reading of core consumer prices, which excludes food and energy prices, edged up 0.1 percent in April compared to a 0.2 percent increase in March.

On an annual basis, core consumer prices were up 2.1 percent in April, unchanged from the annual rate of growth reported for the previous month.

While the annual rate of core consumer price growth is slightly above the Federal Reserve`s target of about 2.0 percent growth, the relatively tame inflation data may offset some of the concerns about the impact of rising commodity prices.

The modest increases in personal income and spending are also likely to add to recent indications that the economy will be able to weather the economic slowdown without slipping into a recession.

On Thursday, a separate Commerce Department report showed that first quarter gross domestic product growth was revised up to 0.9 percent from the 0.6 percent originally reported. The upward revision came in line with economist estimates.

With the upward revision, the GDP growth in the first quarter marks a modest acceleration from the 0.6 percent growth seen in the fourth quarter.

The relatively modest economic growth that was seen in the first quarter reflected positive contributions from consumer spending on services, exports of goods and services, federal government spending, and private inventory investment.

The growth was partly offset by negative contributions from residential fixed investment and consumer spending on durable goods.

The Commerce Department also noted that the small acceleration in GDP growth compared to the fourth quarter primarily reflected an upturn in inventory investment that was partly offset by a deceleration in consumer spending.