WASHINGTON – Americans cut back on spending in April after their income failed to grow, a sign that economic growth may be slowing.
Consumer spending dropped a seasonally adjusted 0.2 percent in April, the Commerce Department said Friday. That was the first decline since last May. It followed a 0.1 percent increase in March and a 0.8 percent jump in February.
A drop in gas prices most likely lowered overall spending. Adjusted for inflation, spending ticked up 0.1 percent last month. Still, that was the smallest gain since October.
Consumers also most likely spent less to heat their homes in April, which may have reduced spending on utilities.
Income was unchanged in April after a 0.3 percent rise in March and 1.2 percent gain in February. Wages and salaries barely grew, while government benefit payments fell.
The retrenchment in spending indicates consumers may be starting to feel the effect of higher taxes. But a separate report Friday showed consumer confidence rose to a six-year high in May, suggesting the decline in spending may be temporary.
Americans are taking home less pay this year because of a 2 percentage point increase in Social Security taxes. A person earning $50,000 a year has about $1,000 less to spend this year. A household with two high-paid workers has up to $4,500 less.
Income taxes on the wealthiest Americans also increased.
Consumer spending drives 70 percent of economic activity. It grew at the fastest pace in more than two years from January through March, helping the economy expand at a 2.4 annual rate during that quarter.