Consumer Spending Probably Cooled as U.S. Food, Fuel Prices Bring Cutbacks

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Consumer Spending

As reported by Bloomberg’s Timothy R. Homan:

Consumer spending probably cooled in April as higher food and fuel prices forced Americans to cut back on other items, economists said a government report this week will show.

Purchases increased 0.5 percent, the smallest gain in three months, after climbing 0.6 percent in March, according to the median estimate of 66 economists surveyed by Bloomberg News before a May 27 Commerce Department report. Other data may show business investment, the stalwart of the recovery, kept growing.

Manufacturers like Deere & Co. (DE) are benefiting from gains in spending on equipment and software, while retailers like Wal- Mart Stores Inc. are reporting slower U.S. sales as households feel the pinch of grocery and energy bills. Chairman Ben S. Bernanke is among Federal Reserve officials who predict the acceleration in commodity prices will be temporary.

“Consumers are allocating more of their dollars toward fuel,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “Manufacturing has been holding up pretty well considering the rise in gasoline prices” and the supply-chain disruptions in Japan, he said.

The Commerce Department report will also show incomes rose 0.4 percent, the seventh straight monthly gain, after a 0.5 percent increase in March, according to the survey median.

Higher prices for necessities like food and energy are weighing on purchases of less essential items. The average cost of a gallon of regular gasoline averaged $3.81 in April after $3.54 the prior month, according to AAA, the nation’s biggest motoring organization.

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