U.S. consumer spending fell in April, despite personal income posting the largest increase in 11 months, a government report showed on Monday, pointing to lackluster consumption activity in the second quarter.
The Commerce Department said spending slipped 0.1 percent after a revised 0.3 percent fall in March, previously reported as a 0.2 percent drop. That was slightly better than market expectations for a 0.2 percent fall in spending.
A government report on Friday showed spending, which accounts for over 70 percent of economic activity, rose at a 1.5 percent annual rate in the first quarter, but slower than the 2.2 percent increase the Commerce Department had previously estimated. Consumption plunged in the second half of last year.
Personal income rose 0.5 percent, the biggest increase since May last year, after falling by a revised 0.2 percent in March, which had been reported as a 0.3 percent decline in March. Analysts polled by Reuters had forecast income to fall 0.2 percent in April.
Real disposable income surged 1.1 percent in April, boosted by tax cuts and increased social benefit payments under the government's record $787 billion stimulus package, the Commerce Department said. Excluding the stimulus package, real disposable income increased 0.7 percent in April.
Savings jumped to a record annual rate of $620.2 billion. The savings rate rose to 5.7 percent in April, the highest level since February 1995, from 4.5 percent the previous month. Households, buffeted by job losses and falling asset values, are cutting back spending on non-essential items, preferring to save any extra income.
(Reporting by Lucia Mutikani; Editing by Neil Stempleman)