Economists have been waiting for a surge in consumer spending fueled by savings at the gas pump and a stronger job market boosting personal incomes. They’re going to have to keep waiting.
The Commerce Department on Monday said personal spending was essentially flat in April —it fell less than 0.1 percent — even as personal income rose a better-than-expected 0.4 percent. Americans made more money in April but they didn’t spend more. Instead, they socked it away, raising the savings rate — personal savings as a percentage of disposable income — from 5.2 percent in March to 5.6 percent in April.
The April spending picture was the reverse of that from March, when incomes growth stalled but spending rose. Overall, though, Americans still look to be hesitant about opening up their wallets.
“This report clearly indicates that the bounce back in March did not continue into April,” Chris G. Christopher, Jr., director of consumer economics at HIS Global Insight, said in a note to clients. “It is becoming blatantly obvious that the so-called consumer gasoline price dividend is not motivating the average American household to increase their discretionary spending in any meaningful manner.”
Energy prices have risen lately, but they are still down 20 percent from where they were a year ago, notes PNC Senior Macroeconomist Gus Faucher. Eventually, that should still translate to more spending as long as the job market recovery continues apace.
“Clearly, consumption is hardly booming, but the lag between declines in gas prices and the response in the spending numbers is long, typically six or seven months,” Ian Shepherdson, chief economist at Pantheon Macroeconomcs, said in a note to clients. “Gas prices did begin to fall rapidly until November, with the biggest single drop in January, so we don't expect to see consumption accelerate properly until the summer.”
For now, the economists — and the economy — keep waiting.
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“The fact is very little medical care is shoppable. We become good shoppers when we are repeat shoppers. If you buy a new car every three years, you can become an informed shopper. There is no way to become an informed shopper for your appendix. You only get your appendix out once.”
— David Newman, former director of the Health Care Cost Institute, quoted in an article Thursday by Noam Levey of the Los Angeles Times. Levey says the “consumer revolution” in health care – in which patients shop around for the best prices, forcing doctors, hospitals and pharmaceutical firms to compete with lower prices – hasn’t materialized, but the higher deductibles that were part of the effort are very much in effect. “High-deductible health insurance was supposed to make American patients into smart shoppers,” Levey writes. “Instead, they got stuck with medical bills they can't afford.”
The House Ways and Means Committee released a new analysis of drug prices in the U.S. compared to 11 other developed nations, and the results, though predictable, aren’t pretty. Here are the key findings from the report:
- The U.S. pays the most for drugs, though prices varied widely.
- U.S. drug prices were nearly four times higher than average prices compared to similar countries.
- U.S. consumers pay significantly more for drugs than other countries, even when accounting for rebates.
- The U.S. could save $49 billion annually on Medicare Part D alone by using average drug prices for comparator countries.