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Consumers more cautious in April, report says

Expert says spending should pick up soon

WASHINGTON – Consumers don’t appear confident enough in the economy to open their wallets more freely.

Their spending stalled in April. Without stronger job creation and higher pay, people are less likely to up their spending in the months ahead and invigorate the recovery.

The flat level for consumer spending was the weakest showing in seven months, according to the Commerce Department report. Personal incomes rose 0.4 percent, in line with expectations but not fast enough to help generate real growth.

Falling gas prices and cheaper utility bills could make people feel better about spending more over the summer. So could historically low mortgage rates. That would lead more people to refinance and leave them with more disposable income.

But Nigel Gault, an economist at IHS Global Insight, said employment will be key to supporting income growth in coming months.

“The consumer needs sustainable income support, so employment reports including next Friday’s will be key signals of just how robust consumption will be over the rest of 2010,” Gault said.

Economists are looking for 503,000 jobs to be added in May. That would be better than April’s 290,000 increase, the biggest one-month rise in four years. The May surge is expected to include a sizable number of temporary census workers hired by the government.

Still, the April jobs report showed that 15.3 million people remain out of work. Economists say it will take at least five years for the economy to regain the nearly 8 million jobs wiped out during the recession.

In the meantime, more people are holding on to their money. The savings rate rose 3.6 percent in April.

People are feeling a need to rebuild savings and reduce their debt loads and this will dampen consumer spending in coming months, said Sal Guatieri, an economist at BMO Capital Markets. But this will be offset somewhat by rising employment gains. “Although consumers stalled in April, earlier strength and improving labor markets suggest they are merely down and not out,” Guartieri said.

Consumer spending is closely watched because it accounts for 70 percent of total economic activity.



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Where does the money go?

sponsored You’ve probably heard of co-ops: food co-ops, childcare co-ops, housing co-ops, energy co-ops.



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