US spending was strong in April, but incomes weaker at the end of 2022, and savings lower.

After a couple of flat months, Americans resumed spending in April, underscoring a still-growing economy.

U.S. consumer spending increased more than expected in April, boosting the economy's growth prospects for the second quarter, and inflation picked up, which could prompt the Federal Reserve to raise interest rates again next month....

"Companies and consumers are in agreement that there are plenty of green shoots to like at the start of springtime and right now the economy is miles and miles away from the cliffs of recession," said Christopher Rupkey, chief economist at FWDBONDS in New York. "Fed officials won't be able to pause their rate hikes, it looks like demand is picking up, not slowing down as it is supposed to do when the Fed hikes rates."

Consumer spending jumped 0.8% last month after gaining 0.1% in March. Economists polled by Reuters had forecast consumer spending, which accounts for more than two-thirds of U.S. economic activity, would rise 0.4%.

It's not always been consistent, but inflation-adjusted consumer spending continues to slowly rise after its immediate post-vaccination bump in early 2021. And January and April 2023 have had noticeable jumps.

Moving over to the income side, there was growth there as well, although in line with the increase in prices.

Personal income increased $80.1 billion (0.4 percent at a monthly rate) in April, according to estimates released today by the Bureau of Economic Analysis (table 3 and table 5). Disposable personal income (DPI) increased $79.4 billion (0.4 percent) and personal consumption expenditures (PCE) increased $151.7 billion (0.8 percent)....

The increase in current-dollar personal income in April primarily reflected increases in compensation and personal income receipts on assets that were partly offset by a decrease in personal current transfer receipts (table 3). The increase in compensation was led by private wages and salaries. The increase in personal income receipts on assets reflected increases in both personal interest income and personal dividend income. The decrease in personal current transfer receipts was led by a decrease in “other” government social benefits.

But to me, another major headline of the income data comes inside of this note from the Bureau of Economic Analysis.

Estimates have been updated for October through March. For October through December, estimates for compensation, personal taxes, and contributions for government social insurance reflect the incorporation of updated fourth-quarter wage and salary data from the Bureau of Labor Statistics Quarterly Census of Employment and Wages program. Revised and previously published changes from the preceding month for current-dollar personal income and for current-dollar and chained (2012) dollar DPI and PCE are provided below for February and March.

The February and March figures aren't changed much from their original reporting, but those updated figures from the last 3 months of 2022 show that wage growth took a step back, and was quite a bit lower than first reported.

On the inflation front, the lower wage growth should offer another bit of evidence that inflation isn't much of a future threat, with wage pressures being even less tbut it also means the US savings rate was lower than originally reported, and now is at 4.1% for April after being reported at 5.1% in March's income and spending - a $200 billion difference on an annual rate.

That's not a good sign going forward, as the consumer may be closed to being tapped out than the overall numbers may indicate. It also helps to explain how we have record-high credit card balances, and with higher interest rates than in past times. But despite the fear-mongering about 4.4% PCE inflation, if incomes are growing by a similar amount, and consumer spending stays slightly ahead of that, does that sound like a bad thing? It keeps demand going while not having cost pressures cause inflation to get out of control. And while the downward revision in wage growth indicates that maybe things weren't as great as we thought for Q4 2022, it also means that we aren't overheating, despite our 3.4% unemployment rate.

And while the media thought the Fed would use the inflation reading as reason to tighten when they next meet in 2 1/2 weeks, I hope they also noticed the lower wage and income figures, and the higher credit card balances. If so, the Fed officials should back off and let things play out for the next few months, if they really want us to have the "soft landing" of lower inflation and moderate growth that would keep people on the job, and OK with where the economy is at.