Higher fuel and food prices in April led to a cooling in consumer spending, according to economists surveyed by Bloomberg News ahead of a U.S. Commerce Department report set for release on Friday.
Prices for necessities like food and energy are impacting purchases for less essential items. The average cost for a gallon of regular gasoline averaged $3.81 in April after $3.54 the prior month, according to AAA. Those cost pressures began to wane this month with prices at the pump peaking at $3.99 on May 4, but falling some to $3.89 on May 19.
Overall consumer purchases rose 0.5% in April, the smallest gain in three months, according to the median estimate of 66 economists surveyed. Other data may show business investment, the stalwart of the recovery, kept growing.
The housing market continues to struggle as foreclosures mount. Pending home sales, or contract signings for existing homes, fell 1% in April after a 5.1% jump in March, economists forecast the National Association of Realtors will report on May 27. Sales of new homes, which account for about 5% of the market, were little changed at a 300,000 annual pace in April, according to economists surveyed by Bloomberg. New houses have sold at an average 294,000 rate in the first three months of the year, compared with a record-low 323,000 for all of 2010.
Elsewhere, gains in employment and higher stock values are countering gas prices when it comes to confidence among Americans, according to data from Thomson Reuters/University of Michigan. That group’s final sentiment index for May is projected to climb to 72.4, the highest in three months, from 69.8 at the end of April, according to economists surveyed ahead of the Commerce Department report.
Finally, sales at U.S. Wal-Mart stores open at least a year dropped 1.1% in the first quarter, the eighth decline in a row. Customers are still struggling with economic uncertainty, buying more generic items rather than their more costly name-brand counterparts, executives said in a May 17 pre-recorded call.
