U.S personal income was up slightly, while spending slipped in April.

“Following a strong upwardly revised gain of $37.6 billion in March, personal income grew by $4 billion in April, right on consensus expectations,” reports RBC Financial economist Ivana Rupcic. At the same time, personal spending slipped 0.1%.

Rupcic says that the weak income results was primarily due to a $12-billion fall in private wage and salary disbursements, a sharp contrast to the $25.6 billion gain in March. This marked the first decline in nine months.

“In light of continued weakness in the labour market, the outlook for wages, which make up the majority of personal income, remains gloomy,” she says. However, it expects the recently approved U.S. government fiscal stimulus package will probably provide a further boost to disposable income.

The dip in personal spending compared to an anticipated increase of the same magnitude, but there was an upward revision in March growth to 0.8% as a result of a large upward revision to retail sales estimates. Durables spending rose 1.2% during the month, while nondurable spending fell 1.4%. Service spending, which grows at the most stable pace, rose 0.3%.

“Despite a slowdown from last year’s pace, continued improvements in consumer confidence, a new wave of tax cuts, and a still-booming mortgage refinancing market, will continue to add fuel to consumer spending in the short-run,” Rupcic says. “Over the longer term, however, improvements on the job front will be needed to support spending levels.”

BMO Nesbitt Burns Inc. notes that spending on durables and services rose, while sales of non-durables fell sharply. “A big upward revision to spending in March takes some of the sting off the decline in activity last month,” it says.

“With heightened concerns about the risk of deflation, it is notable that the core PCE deflator – the Fed’s preferred measure of inflation – rose 0.1% in April, matching the rise of the last two months,” says BMO chief economist Sherry Cooper. “There is no sign of deflation yet, but the trend over the last six months does support the Fed’s concern that inflation could fall below 1.0% in the coming months.”

“Personal income and spending were on the soft side in April. However, the recently passed tax cuts, which will include rebate cheques, suggest that U.S. consumers will continue to spend,” Cooper said.

RBC said that moderating inflation, “highlights the excess capacity problems facing the U.S. economy, although upward relief for prices from a weaker U.S. dollar should begin to flow in by year-end.”