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Confidence falls on pessimism over wages
U.S. consumer confidence fell in May as Americans grew more pessimistic about future pay increases, though they remained optimistic about the broader economy.
The University of Michigan says that its index of consumer sentiment dropped to 81.9 this month from 84.1 in April. Still, Richard Curtin, director of the survey, says that confidence in the first five months of this year has been at the highest level since 2007, before the recession began.
Nearly half of all households expect their inflation-adjusted income to decline over the next 12 months, the survey found. And among those that did anticipate gains, most expect increases of just 1 percent or 2 percent.
Consumer confidence is closely watched because spending by consumers drives about 70 percent of the economy.
– Associated Press
Associated Press
A cashier rings up a sale in Las Vegas. Consumer spending fell slightly in April, according to federal data.

Consumer spending dips

April’s fall follows March’s surge; analysts expect rebound

– U.S. consumers cut back on spending in April for the first time in a year, taking an unexpected pause after a big jump during the previous month.

The results, however, are unlikely to derail an expected spring rebound in the economy.

Consumer spending fell 0.1 percent in April, the Commerce Department said Friday. The drop was the first in 12 months. But it followed a 1 percent surge in spending in March, which marked the biggest increase in more than four years.

“It is obvious that after an unseasonably colder January and February consumers came out with a vengeance in March,” Chris Christopher, an economist at IHS Global Insight, said in a note to clients. “So, April’s poor showing on the spending front is payback for a strong March.”

The latest figure reflects reductions in durable goods purchases such as autos and in services such as heating bills. While disappointed, analysts say the results don’t change the broader upward trajectory of the economy and predict consumer demand to bounce back in May.

An “improving job market should support stronger spending in coming months,” Jennifer Lee, senior economist at BMO Capital Markets, wrote in a research note.

Friday’s government report also showed that income rose 0.3 percent in April after advancing 0.5 percent in March.

That marks the fourth consecutive monthly climb. The economy has been generating jobs at a solid pace in recent months, including a gain of 288,000 jobs in April, the strongest uptick in hiring in two years.

With spending down and Americans earning more, the saving rate rose in April to 4 percent of after-tax income, up from a saving rate of 3.6 percent in March.

Inflation showed prices rising 1.6 percent from a year ago, up from a 1.1 percent year-over-year price gain in March.

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