Even though consumer confidence reported last week was much higher than expected, consumers do not appear to be confident enough to spend their money. In April, consumers cut back on their spending, saw income levels increase, and saved at a rate unseen in over a decade.
The personal savings rate in April was 5.7 percent in April, compared to 4.5 percent in March. A rate of savings this high has not been seen since early-1995.
The increase in income was a surprise to economists, who expected a drop in income. With unemployment increasing, consumers appear more cautious, leading to the increase in savings.
About 70 percent of economic activity comes from consumer spending. April's consumer spending saw fewer durable goods purchases, like appliances and cars. Non-durable goods also dropped, which includes food and clothing. Consumers did increase their spending on services by 0.3 percent, which is an increase over March.
