But the rate of spending is outpacing income growth, and the savings rate has dipped as a percentage of disposable income.
So, the question becomes: How long can it all last?
The Bureau of Economic Analysis reported Friday (May 26) that personal consumption expenditures (PCE) were up by nearly 0.8% in April, at roughly $152 billion, as measured month over month. Personal income was up 0.4%. The pace of spending quickened, as the 0.8% rate represents a leap over the 0.1% growth seen in each of the preceding two months. The personal savings tally, at $802 billion in April, represents a decline from the $878 billion seen in March.
The 4.1% savings rate also slipped from the 4.5% rate seen in March. Interestingly, the line item noting “personal interest payments” — which is tied to non-mortgage debt — was a bit more than $448 billion in the most recent month, up from $444 billion in March and up significantly from roughly $376 billion in September of last year.
Where We’re Spending — and Where We Aren’t
The data shows that consumers continue to spend, although they’re saving less and paying more on their credit cards, which shows, too, that the “cushion” that might support future spending is shrinking a bit.
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Additional details about various spending categories give insight into where individuals and households are spending their money, and where they aren’t. Spending on motor vehicles and parts increased, essentially making sure that we can get where we need to go. Spending on furnishings and durable household equipment slipped month over month, from nearly $102 billion in March to $101 billion on a seasonally adjusted basis.
Food and beverages purchased for off-site consumption — groceries — slipped slightly, as inflation’s growth cools. It’s worth noting, too, that clothing and footwear spending was up roughly 0.3% month over month. Yet as we’ve seen during earnings season, several retailers have been taking steps to clear inventories amid uncertain demand.
The juggling act between spending, managing inflation and dealing with the monthly obligations of the credit card statement has become ever more apparent in PYMNTS research. As noted in the most recent “Paycheck-to-Paycheck Report,” 80% of consumers who have noticed price increases believe their wages have not increased to at least match inflation.
Other data from official government channels reflects the fact that although spending has been resilient, consumers and households are finding that they feel “worse off” than they felt a year ago. The Federal Reserve’s most recent surveys on economic well-being found, too, that in response to inflation, two-thirds of consumers used fewer, or stopped using, a variety of goods. Nearly two-thirds switched to cheaper products. More than half reduced their savings.
PYMNTS has found that roughly 69% of individuals have pared back spending on retail items, with slightly lower percentages for grocery items. Twenty-seven percent of consumers have used savings to pay down credit card debt.
April’s consumer data points to the fact that inflation is still running hot, and the debt and savings we’ve been using to keep up with that pace are pressured.
