US consumers hold back spending in April, even as gas prices fall

WASHINGTON – Lower gas prices in April weren’t enough to embolden U.S. consumers to spend more elsewhere.

The Commerce Department said retail sales rose only 0.1 percent last month. Even after excluding gasoline station sales, consumers increased their spending on retail goods by just 0.2 percent.

That followed two stronger months in February and March. Some economists say a mild winter led consumers to make purchases earlier in the year, effectively stealing sales from April.

Gasoline prices have fallen sharply in the past month. The national average dropped to roughly $3.73 per gallon on Monday, roughly 17 cents cheaper than a month ago, according to a survey by AAA. While that could help consumer spending going forward, the drop in prices did little to boost spending on discretionary goods in April.

The retail sales report represents the government’s first look at consumer spending for the April-June quarter. Consumer spending is closely watched since it accounts for 70 percent of economic activity.

In the January-March quarter, overall economic growth slowed to an annual pace of 2.2 percent. That’s down from the 3 percent increase in the October-December period, but faster than last year’s 1.7 percent pace.

The slowdown occurred because of weaker government spending and business investment. Consumer spending grew at an annual rate of 2.9 percent in the first quarter, the fastest pace in more than a year.

Economists expect consumer spending will remain solid in the coming months. Falling gas prices and modest job gains could increase Americans’ confidence in the economy.

The University of Michigan said its Consumer Sentiment index for May rose to its highest level since January 2008.

But income growth has lagged behind inflation. That could weaken further if job gains don’t pick up in coming months. Workers’ average hourly earnings have risen just 1.3 percent in the 12 months that ended in April. That’s roughly half the pace of inflation over the same 12 months.

And job growth has slowed from the start of the year. Employers added an average of 252,000 jobs per month from December through February. The average fell to just 135,000 jobs per month in March and April.

Many economists expect job growth will pick up in the next few months. But few see it being as strong as earlier this year. That should keep consumers spending and help the economy grow at a moderate pace.