Consumer Spending Up for Fifth Straight Month

Consumers opened their pocketbooks and wallets wider in April and increased their spending by 0.5 percent, the government said Tuesday in a report showing shoppers are helping to underpin the economic recovery.

Consumer spending, up for the fifth month in a row, rose to $7.32 trillion in April after gaining 0.3 percent the previous month, the Commerce Department said. The number, however, was slightly lower than analyst expectations of a 0.7 percent increase.

Consumers, whose spending accounts for two-thirds of all economic activity in the United States, especially splurged last month on big-ticket items, such as cars. Low interest rates and discounts on a range of costly manufactured goods continue to motivate buyers.

Americans' incomes, including wages, interest and government benefits, went up 0.3 percent in April, a rise that matched expectations.

With the rise in consumer spending outpacing growth in income in April, the savings rate fell to 2.8 percent from 3.0 percent in March.

The report showed inflation, key to the thinking of Federal Reserve policymakers as they try to decide when to increase U.S. interest rates, edging up slightly.

The PCE price index, closely watched by Fed Chairman Alan Greenspan, rose 0.4 percent, the largest rise since 0.6 percent in October last year. The so-called core rate, which strips out volatile food and energy prices, rose 0.2 percent.

Retailers and other companies — concerned about how much energy shoppers have left in them — have continued to discount merchandise and offer other incentives and promotions to buoy sales.

In April, consumer spending on big-ticket durable goods, such as cars and appliances, rose 1.4 percent. In March, consumers cut back spending on these items by 0.2 percent.

Spending on nondurable goods, such as clothes and food, went up 0.8 percent in April, up from a 0.2 percent rise. Spending on services rose 0.2 percent in April, down from a 0.5 percent advance the month before.

Disposable incomes — income after taxes — grew 0.3 percent in April, after a 0.5 percent increase.

Consumers continued to spend in April despite the fact that the nation's unemployment rate hit a nearly eight-year high of 6 percent that month. Many economists predict the jobless rate will move as high as 6.5 percent by June because companies will be slow to hire-back laid off workers.

Some analysts are worried about how consumers will hold up as the jobless rate rises. That's another reason analysts expect the Fed will keep interest rates steady through the summer.

Reuters and the Associated Press contributed to this report.