Consumer spending in U.S. rises by most in almost seven years

WASHINGTON – Consumer spending climbed in April by the most in almost seven years, a sign U.S. households are ready to help jump start growth after a first-quarter slowdown.

Purchases climbed 1 percent, the biggest gain since August 2009, after being little changed in March, Commerce Department figures showed Tuesday in Washington. The median forecast of 74 economists in a Bloomberg survey called for a 0.7 percent increase. Incomes climbed 0.4 percent, while inflation picked up.

Households will need to do the heavy lifting if a growth rebound is to materialize this quarter as global demand and corporate investment remain sluggish. Continued increases in payrolls and a gradual pickup in wages should help give consumers the means and the willingness to spend.

“You definitely want to see that pickup in April to fit into the story of a second-quarter rebound,” Sophia Kearney-Lederman, an economic analyst at FTN Financial in New York, said before the report. Supporting the increase, “we have seen strong payrolls and incomes coming up, we’ve seen vehicle sales rebound, and we saw housing had a pretty good month.”

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Projections for April spending ranged from gains of 0.2 percent to 1.1 percent. The previous month’s reading was revised down from an initially reported 0.1 percent increase.

The increase in incomes matched the Bloomberg survey median and followed a similar 0.4 percent gain in March.

The report showed the price index tied to consumer spending increased 0.3 percent in April, the biggest advance since May 2015. From a year earlier, the gauge was up 1.1 percent. This inflation measure is preferred by Federal Reserve policy makers, and it hasn’t met their target 2 percent since April 2012.

Stripping out the volatile food and energy components, the price measure rose 0.2 percent from the month before and 1.6 percent in the 12 months ended April, matching the prior month’s year-to-year increase.

After adjusting for inflation, which generates the figures used to calculate gross domestic product, purchases climbed 0.6 percent in April, the biggest gain since February 2014.

Spending on durable goods, including automobiles, jumped 2.2 percent adjusting for inflation, following a 0.2 percent gain in March. Purchases of non-durable goods, which include gasoline, climbed 0.7 percent, while outlays on services increased 0.4 percent.

Disposable income, or money left over after taxes, increased 0.2 percent in April from the prior month after adjusting for inflation. It was up 3.3 percent over the past year.

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