We have now seen the report on personal income and spending for the month of April, and frankly both look a bit soft and may have a slight impact on some of the second-quarter gross domestic product (GDP) estimates. The only caveat we would throw out here is that a more recent consumer confidence reading from May showed that the trends were already better than what today's April numbers might indicate.
The Commerce Department showed that personal income was unchanged in April, lower than the 0.1% growth projected by Bloomberg and Dow Jones. Consumer spending actually was down by 0.2%, rather than a consensus reading of breakeven from Bloomberg. Note that consumer spending is a key component of GDP, and this was the first drop in close to a year.
It seems that one of the culprits on the drop in spending was lower prices on goods. If you factor in lower gasoline prices and include some of the inflationary data, spending and disposable income would have been up by 0.1%. The price index was actually softer than the FOMC is targeting, at 0.7%, rather than closer to the 2% "mandate" levels.
Equity futures were trading lower before the numbers were released this morning, and the futures markets remain a tad weaker after the report. S&P 500 futures were down 8.50 and DJIA futures are down by about 80 points shortly after the reports.
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