May 27 (Bloomberg) -- U.S. consumer spending probably rose in April at the fastest pace of the year, boosted by job growth, economists said before a government report today.

The Commerce Department is expected to report a 0.8 percent increase in spending, according to the median of 66 estimates in a survey by Bloomberg News. Spending rose 0.6 percent in March. Incomes probably increased 0.7 percent after a 0.5 percent gain.

The economy created 274,000 jobs last month and employees worked longer hours, leading to the biggest jump in average weekly paychecks in eight years, the Labor Department reported earlier this month. Income growth will support spending and keep the economy expanding in coming months, even with gasoline prices near a record, economists said.

``Spending will show a robust gain for April,'' said Lynn Reaser, chief economist at Banc of America Capital Management in Boston. ``More importantly, that spending was backed by a healthy bounce in personal income. We would expect to see solid consumer spending growth in the second quarter similar to the good gain we saw in the January-through-March period.''

Spending and income data are scheduled for release at 8:30 a.m. in Washington. All economists surveyed expect spending to rise, with increases ranging from 0.5 percent to 1 percent.

Rising stock prices this month and a drop in gasoline prices from their early April peak may prevent a further decline in consumer confidence, economists expect a report from the University of Michigan will show.

The university's final sentiment index for May, due at about 9:45 a.m. Washington time, probably rose to 86 from the preliminary reading of 85.3, according to the survey median. It would still be the lowest reading since April 2003, down from the 87.7 registered in April.

Confidence and Spending

``There is a large disconnect between the confidence surveys and actual household behavior,'' Reaser said. ``We will see confidence start to rise as gasoline prices seem to be subsiding and the job market continues to improve.''

A report earlier this month from the Commerce Department showed that retail sales, which account for about half of all consumer spending, rose 1.4 percent in April, twice as much as expected. Americans bought more cars, clothes and meals out.

Sales excluding auto dealers, service stations and building supply stores, the measure used by the government to help calculate gross domestic product, jumped 1 percent, the most since September, the report showed.

Quarterly Spending

Consumer spending, which accounts for about 70 percent of the economy, grew in the first quarter at a 3.6 percent annual pace, more than the government initially estimated last month, the department reported yesterday. That helped the economy expand at a revised 3.5 percent pace during the period, more than the 3.1 percent first reported a month ago.

The increase in retail purchases last month suggests spending will accelerate to a 3.8 percent rate this quarter, according to a forecast by economists at Banc of America Securities Inc. in New York. Spending grew at an average 3.5 percent pace per quarter in the last two decades.

The jump in hiring and increase in hours last month pushed average weekly earnings to $542.40, up $4.88 from March, the job report earlier this month showed. The 0.9 percent increase was the biggest since August 1997.

Automakers sold cars and light trucks at a 17.5 million annual pace last month, up from 16.8 million in March and 16.6 million a year earlier, according to industry figures released May 3.

``Sales are great,'' Thomas McGurn, general manager of retail and industry relations at Bayerische Motoren Werke AG's BMW of North America division, said in an interview May 24. ``Our sales will increase in the United States, and we are looking for a worldwide increase as well.'' BMW is the world's largest maker of luxury cars.

Price Measures

Williams-Sonoma Inc. said May 24 that first-quarter profit rose 22 percent, beating analysts' estimates, on higher sales of furniture at its Pottery Barn chain. Sales in the period that ended May 1 rose 12 percent from a year earlier, the San Francisco-based retailer said.

Investors are likely to focus as well on the price measures in today's income and spending report, economists said. The Federal Reserve uses these gauges to help decide whether to raise interest rates.

``The inflation picture seems likely to continue to support the Fed's measured tightening for the balance of the year,'' said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut.

Central bankers next meet on June 29-30 and are expected to raise the target for the benchmark overnight bank lending rate by a quarter percentage point to 3.25 percent, according to the median estimate in a separate Bloomberg News survey. It would be the ninth straight increase of that size since June 2004.

                          Bloomberg Survey

          FIRM                     Personal Personal  U of M
                                    Income  Spending  Conf.
          ---------------------------------------------------
          Number of replies           63       66       47
          MEDIAN                     0.7%     0.8%     86.0
          AVERAGE                    0.7%     0.8%     86.0
          High Forecast              1.2%     1.0%     89.0
          Low Forecast               0.4%     0.5%     84.0
          Previous                   0.5%     0.6%     85.3
          ---------------------------------------------------
          4CAST Ltd.                 0.7%     0.8%     85.5
          Action Economics           0.7%     0.8%     85.3
          AIG Global Invest.         0.6%     0.8%     89.0
          AIB Global Treasury        0.7%     0.8%     86.6
          Alleti Gestielle SGR       0.7%     0.9%     87.4
          Ampega Asset Mang.         n/a      n/a      87.0
          Argus Research Corp.       0.6%     0.6%     85.5
          B of A Capital             1.2%     0.9%     86.0
          B of A Securities          1.2%     0.9%     n/a
          Bantleon Bank AG           0.7%     0.6%     86.0
          Barclays Capital           0.8%     0.8%     86.5
          Bear Stearns               0.8%     0.9%     n/a
          Bank of Tokyo- Mitsub.     0.6%     0.8%     86.2
          Briefing.com               0.6%     0.8%     85.3
          Calyon                     0.7%     0.9%     85.7
          CantorViewpoint            0.7%     0.8%     85.8
          CIBC World Markets         0.8%     0.8%     85.5
          Citigroup                  0.8%     1.0%     84.5
          Commerzbank                0.7%     0.8%     87.0
          Commonwealth Bank          0.8%     1.0%     n/a
          Credit Agricole            0.4%     0.7%     n/a
          Credit Suisse FB           0.8%     n/a      86.0
          Daiwa Securities           0.9%     0.7%     85.3
          DekaBank                   0.7%     0.7%     87.0
          Desjardins Group           0.4%     0.6%     85.3
          Deutsche Bank Research     1.0%     0.9%     87.0
          Deutsche PostBank          n/a      0.8%     n/a
          Dresdner Kleinwort         0.6%     0.6%     86.5
          Exane                      0.9%     0.8%     n/a
          Fortis Bank NV             n/a      1.0%     86.5
          Global Insight             0.7%     0.7%     n/a
          Goldman Sachs              0.7%     0.8%     n/a
          High Frequency Economics   0.5%     0.8%     n/a
          HSBC Markets               0.6%     0.8%     86.0
          HypoVereinsbank            0.8%     0.6%     84.0
          I.D.E.A.                   0.6%     0.8%     86.0
          ING Financial Markets      0.5%     0.6%     88.0
          Informa Global Markets     0.6%     0.9%     85.7
          IntesaBci                  0.8%     0.8%     n/a
          IXIS-CIB                   0.6%     0.9%     n/a
          J.P. Morgan                0.8%     0.9%     86.5
          JPMorgan Asset Mg          0.6%     0.8%     n/a
          Lehman Brothers            0.7%     0.8%     85.5
          Macroeconomic              0.6%     0.7%     n/a
          Merrill Lynch              0.7%     0.5%     85.8
          Mizuho Securities          0.7%     0.8%     85.5
          Morgan Keegan              0.7%     0.7%     n/a
          Morgan Stanley             0.8%     0.8%     n/a
          National Bank Financial    0.5%     0.6%     86.2
          National City Bank         0.5%     0.7%     86.1
          Nesbitt Burns BMO          0.9%     0.9%     85.3
          Nomura                     0.7%     0.7%     n/a
          Nord/LB                    0.6%     0.7%     85.0
          PNC Bank                   0.8%     0.9%     n/a
          RBS Greenwich Capital      0.6%     0.8%     n/a
          Rasbank                    n/a      0.7%     n/a
          Ried, Thunberg & Co.       n/a      0.9%     85.5
          Scotiabank Group           0.6%     0.8%     86.0
          Societe Generale           0.8%     0.7%     n/a
          Stone & McCarthy           0.6%     0.7%     86.1
          Thomson/IFR                0.6%     0.9%     85.4
          UBS Securities LLC         0.7%     0.8%     86.0
          Ulpia                      0.6%     0.9%     n/a
          Unicredit Banca Mobilare   0.8%     0.8%     86.0
          Wells Fargo                0.7%     0.8%     85.3
          WestLB AG                  0.6%     0.7%     86.0
          Westpac Banking            0.8%     0.9%     85.5
          Wrightson                  0.6%     0.9%     86.0

To contact the report on this story: Carlos Torres in Washington ctorres2@bloomberg.net

Last Updated: May 27, 2005 00:09 EDT