(Bloomberg News) Consumer spending in the U.S. climbed less than forecast in April as food and fuel prices rose, a sign that faster income gains are necessary to boost the biggest part of the economy.
Purchases rose 0.4 percent after a revised 0.5 percent gain the prior month that was smaller than previously estimated, Commerce Department figures showed today in Washington. The increase compared with the 0.5 percent median estimate of economists surveyed by Bloomberg News. Incomes climbed 0.4 percent, matching the median forecast.
Retailers like Wal-Mart Stores Inc. are feeling the pinch as higher grocery and energy bills force households to cut back on less essential items. Federal Reserve Chairman Ben S. Bernanke is among central bankers who predict the acceleration in commodity prices will be temporary, providing some relief for Americans whose spending accounts for 70 percent of the economy.
"When you account for higher food and energy prices there's barely anything left for consumers" to buy, said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who accurately forecast the April gain in spending. "We need to see job growth pick up and we need to see commodity prices continue to cool."
Estimates from 81 economists surveyed by Bloomberg ranged from gains of 0.3 percent to 0.6 percent after a previously reported 0.6 percent gain the prior month.
Stock-index futures maintained gains after the report. The contract on the Standard & Poor's 500 Index expiring in June rose 0.2 percent to 1,329.5 at 8:51 a.m. in New York. Treasuries fell, pushing up the yield on the benchmark 10-year note to 3.09 percent from 3.06 percent late yesterday.
Wages and Salaries
The Commerce Department revised the March income reading to 0.4 percent from a previously reported 0.5 percent. Wages and salaries increased 0.4 percent in April after gaining 0.3 percent a month earlier.
Disposable incomes, or the money left over after taxes, were little changed for a second month after adjusting for inflation. The savings rate held at 4.9 percent, matching the March reading as the lowest since October 2008.
Today's report also showed inflation has picked up from a year ago. The gauge tied to spending patterns increased 2.2 percent from April 2010, the biggest 12-month gain in a year.
The Fed's preferred price measure, the so-called core inflation reading that excludes food and fuel, rose 1 percent in April from a year earlier, the most since September, compared with the 0.9 percent advance in March.
Some U.S. companies are citing commodity costs as contributors to profit declines. Polo Ralph Lauren Corp., the retailer of its namesake brand clothing, fell the most in more than a year earlier this week after it reported a 36 percent drop in quarterly profit, missing analysts' estimates.
Roger Farah, president and chief operating officer of the New York-based firm, said during a May 25 analyst call that the apparel maker is facing "unprecedented inflationary pressures."
Today's report also showed that spending adjusted for inflation, which are the figures used to calculate gross domestic product, rose 0.1 percent in April for a second month.
The economy began 2011 on a weaker note, expanding at a 1.8 percent annual rate in the first quarter after a 3.1 percent gain in the final three months of 2010, Commerce Department figures showed yesterday. Consumer purchases rose at a 2.2 percent pace, less than forecast, following a 4 percent gain the previous quarter.
Americans may find it difficult to boost spending as they pay high prices for fuel. The cost of a gallon of regular gas averaged $3.81 in April after $3.54 the prior month, according to AAA, the nation's biggest motoring organization.