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Spending strength an April surprise

Wed., May 14, 2008, midnight

WASHINGTON – Consumers cut back on car-buying in April but boosted spending in a number of other areas, evidence of the economy’s staying power in spite of soaring gasoline prices.

The Commerce Department said retail sales overall dipped by 0.2 percent last month, but much of that weakness stemmed from a 2.8 percent drop in car sales, the biggest setback in 10 months.

Excluding autos, retail sales rose by a surprisingly strong 0.5 percent. This better-than-expected showing outside of autos was seen as evidence that the consumer is hanging tough even in the face of soaring gasoline prices and a slumping economy.

“The consumer has not given up the ghost and continues to spend,” said Joel Naroff, chief economist at Naroff Economic Advisors.

Analysts said the unexpected strength showed consumer spending in many areas was holding up in April, the start of the second quarter, even before the government began mailing out 130 million economic stimulus payments, checks that are expected to give the economy a boost in coming months.

David Wyss, chief economist at Standard & Poor’s in New York, said he still expects overall economic growth, as measured by the gross domestic product, to turn negative this quarter but that this forecast might prove too pessimistic given the strength seen in April retail sales.

“It looks like it is hard to hold the American consumer back,” he said.

While many analysts believe the economy has slipped into a recession, economic growth has not turned negative yet. Economists now believe the anemic 0.6 percent GDP growth rate turned in for the first quarter may be revised upward to about 1 percent.


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