RTTNews - Personal income unexpectedly increased in the month of April, according to a report released by the Commerce Department on Monday, although the report also showed a modest decrease in personal spending during the month.

The report showed that personal income increased by 0.5 percent in April following a revised 0.2 percent decrease in March. The increase surprised economists, who had expected income to fall by 0.2 percent compared to the 0.3 percent decrease originally reported for the previous month.

Reduced taxes and increased benefit payments associated with President Barack Obama's economic stimulus package contributed to the unexpected increase in income.

Real disposable personal income, or personal income after taxes, surged up 1.1 percent in April after edging up 0.1 percent in March. Excluding the impact of the government's economic stimulus plan, disposable personal income rose by a more modest 0.7 percent.

At the same time, the Commerce Department said that personal spending edged down 0.1 percent in April after falling by a revised 0.3 percent in the previous month. Economists had expected the drop in personal spending to match the 0.2 percent decrease originally reported for March.

The modest decrease in personal spending came amid 0.7 percent decreases in spending on both durable and non-durable goods. Meanwhile, spending on services edged up 0.2 percent.

With income rising and spending fall, personal saving as a percentage of disposable personal income was 5.7 percent in April, compared with 4.5 percent in March. With the increase, the personal savings rate rose to its highest level since February of 1995.

While the personal savings rate rose to a 14-year high, Peter Boockvar, equity strategist at Miller Tabak said, It would have been nicer to see the gain come from legitimate private sector income improvements.

On the inflation front, the Commerce Department's reading on consumer prices showed that the pace of price growth slowed to an annual rate of 0.4 percent in April from 0.6 percent in March

Excluding food and energy prices, core consumer prices rose at an annual rate of 1.9 percent in April, up from the 1.8 percent rate of growth seen in the two previous months.

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