Consumer spending tepid

By @ibtimes on

Consumer spending rose less than expected in April as high gasoline prices continued to squeeze household budgets, according to government data on Friday which also showed annual inflation accelerating at its fastest pace in a year .

The Commerce Department said consumer spending increased 0.4 percent, rising for a 10th straight month, after a downwardly revised 0.5 percent gain in March.

Economists polled by Reuters had expected spending, which accounts for about 70 percent of U.S. economic activity, to rise 0.5 percent last month after a previously reported 0.6 percent rise in March.

When adjusted for inflation, spending nudged up 0.1 percent last month after gaining 0.1 percent in March.

The report suggested consumer spending maintained its weaker tone into the second quarter as high gasoline and food prices continue to stretch household finances.

Consumer spending rose at a 2.2 percent rate in the first quarter, braking sharply from a 4 percent pace in the October-December period.

But a recent cooling in gasoline prices should ease some of the pressure on households and boost spending in the months ahead.

High food and energy prices in April kept inflation pressures simmering, with the personal consumption expenditures price (PCE) index rising 0.3 percent after advancing 0.4 percent in March.

Compared to April last year, the index was up 2.2 percent, the biggest rise in a year, after increasing 1.8 percent in March.

The core PCE index -- excluding food and energy - increased 0.2 percent after rising 0.1 percent in March.

The core index, which is closely watched by Federal Reserve officials, increased 1.0 percent in the 12 months through April , the largest gain since September. The index rose 0.9 percent year-on-year in March and the Fed would like to see it close to 2 percent.

Incomes rose 0.4 percent last month, in line with expectations. Incomes gained 0.4 percent in March. Disposable incomes adjusted for inflation were flat and savings fell to an annual rate of $570.6 billion, the lowest since August 2009, from $576.7 billion in March.

(Reporting by Lucia Mutikani, Editing by Andrea Ricci)

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