US Consumer Spending Strikes a Balance

01 June 2005

US shoppers spent a little less than expected in April, according to the Department of Commerce, but they got more for their money as inflation also eased.

Latest figures show consumer spending rose by just 0.6%, less than the predicted 0.9% increase. Income levels rose by 0.7%, the fastest pace this year.

Consumer inflation rose by 0.4%, broadly in line with the Federal Reserve's plans for interest rate hikes through the year.

Says Tim Mazanec, senior currency strategist at Investors Bank & Trust in Boston: "The trend has been wholesale inflation but very low, contained consumer level inflation. That is what we are seeing, which will keep the Fed on a measured course."

And Michael Englund, chief economist at Action Economics, said April's income gain was "good news for the economy going into the second quarter" and suggested economic growth has been stronger than previously thought.

However, the University of Michigan's measure of consumer confidence slipped to 86.9 in May from 87.7 in April.

The survey's expectations component slipped to 75.3 in May from 77.0 in April, while sentiment on current conditions rose slightly to 104.9 in May from 104.4 in April.

Data sourced from USA Today Online; additional content by WARC staff