U.S. Consumer Spending Growth Unexpectedly Stalls

U.S. consumer spending growth unexpectedly stalled in April as households cut back on purchases of automobiles and continued to boost savings, suggesting the economy was struggling to gain momentum early in the second quarter.  But after a slump in economic growth in the first quarter, there are signs of a rebound, with other reports on Monday showing manufacturing activity picked up in May for the first time in seven months and construction spending surged in April to a near 6-1/2-year high.

Still, sluggish consumer spending growth this year and muted inflation pressures suggest the Federal Reserve may not raise interest rates until later this year.  The Commerce Department said April’s unchanged reading in consumer spending growth compared with analysts’ forecasts for a 0.2 percent rise and followed a 0.5 percent increase in March.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was also curbed by weak demand for utilities such as electricity and natural gas as temperatures warmed up.  The core personal consumption price index (PCE), the Federal Reserve’s preferred inflation gauge, edged up 0.1 percent in the 12 months to April, the smallest gain since October 2009, after rising 0.3 percent in March.


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