Consumer spending - a major indicator as to the health of the economy and also of consumer's expectations - remained "flat" in April, rising only 0.4%. March saw a rise of 2.2% month-over-month, which had economists forecasting equally large increases for the month of April. But neither number is indicative as to what's happening in the economy without proper analysis.
ERRORS:
If you care about consumer spending or any statistic for pure conversational purposes, you may want to consider the errors reported for each statistic, which are found in the original issued report. Every statistic has an error margin and economists can say with 95% certainty that the value reported is between two values. For instance, April's consumer spending increase of 0.4% had a "confidence interval" between -0.1% and 0.9% meaning that economists are 95% certain that the number reported is somewhere in that range. Theoretically, we could have had a decrease of 0.1% or an increase of nearly 1%. What this really means is that the reported statistic is no different from zero.
UNDERLYING ANALYSIS:
Consumer spending normally increases as personal income increases. Both statistics increased 0.4% (theoretically zero) in April. In the same month, the savings rate rose 3.6% indicating that instead of spending, consumers are saving. And for some reason, the media makes this sound scary.
What's really going on is consumers are being careful; they're re-establishing their savings base, something many lost during months of unemployment or furlow. What this means today is that companies might hold off on increased employment and capital spending. What this means in the long run is that consumers are voluntarily creating a stronger, healthier, and safer economy by learning to live within their means. Don't forget, for the housing market to see increased buyers, there must be saved money out there somewhere and that's exactly what people are now doing.
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