U.S. Consumer Spending Rises 0.5% In April

By Agence France-Presse U.S. consumers lifted spending less than expected in April, the government said May 28, in an ominous sign that shoppers may finally be tightening their purse strings. Consumer spending climbed a seasonally adjusted 0.5%, the Commerce Department said. But when adjusted for inflation, real spending edged up just 0.2% in the month and advanced 1.6% annually -- about half of the pace of the first quarter. Consumer spending -- which accounts for two-thirds of U.S. economic activity -- has been the main thrust underlying the U.S. economy. Personal income, meanwhile, rose 0.3%. If consumer spending runs out of fuel, the critical need for a second-stage ignition in the form of business investment will be thrown into even sharper relief. "Consumer spending is slowing from an unsustainable pace in the fourth quarter of last year," says Sal Guatieri, Chicago-based economist at Bank of Montreal. "Hopefully, the other area of the economy will pick up the slack -- mainly business investment." "I think it is fair to say that a full recovery will likely not take place unless we see businesses crank up their capital expenditures," Guatieri warns. A similarly cautious picture for U.S. consumer spending emerged in a survey of people's sentiment by the private economic research group, the Conference Board, New York. It showed consumer confidence strengthened only slightly in May while expectations for the future dimmed. The Conference Board Consumer Confidence Index climbed 1.3 points from April to 109.8 points in May. But while the survey's index of sentiment about the present situation climbed 3.5 points to 110.3, the more critical expectations index declined 0.2 points to 109.4. "Consumers' upbeat mood about current business and labor conditions underscores the economy's continuing recovery," says the Conference Board's consumer sentiment analyst, Lynn Franco. "But the latest retreat in expectations suggests that the pace of economic growth will not accelerate in the months ahead." Copyright Agence France-Presse, 2002