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Consumers held the line on spending in April, putting more into savings even as incomes rose.

Estimates released this morning by the Commerce Department showed that U.S. personal income rose by 0.4 percent in April, the same as the previous month. However, they chose to pocket the extra cash, as personal consumption expenditures remained flat, while savings ticked up significantly, rising to 3.6 percent of disposable income from 3.1 percent the month before.   Although rising incomes are good news for the economy, the stagnant spending rate gives some economists pause, since consumer expenditures are commonly estimated to drive 70 percent of the economy.  Consumer spending had been rising fairly steadily since October, including a 0.6 percent increase in March, so it’s not clear if the current plateau is simply a hiccup or a sign the recovery may be stalling.   Consumers typically curtail spending and save more in the face of economic uncertainty. However, another widely used indicator shows that consumers are feeling more optimistic about the economy. The University of Michigan Index of Consumer Sentiment, released Thursday, rose to 73.6 in May, up from April’s reading of 72.2.   On Thursday, the Commerce Department cited downwardly revised consumer spending estimates in saying the economy grew less than originally thought in the first quarter of the year. U.S. Gross Domestic Product (GDP), was estimated to have grown at a rate of 3.0 percent in the first quarter of the year, revised downward from the original estimate of 3.2 percent issued last month. The Department cited new data showing higher imports, along with lower consumer spending than originally measured, as reasons for the adjustment.  

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