Consumer Spending in U.S. Was Probably Little Changed in April

Consumer spending was probably little changed in April as smaller fuel and utility bills helped Americans shore up savings, economists said before a report today.

The projected unchanged reading for purchases would follow a 0.2 percent rise in March, according to the median of 79 forecasts in a Bloomberg survey. Consumer sentiment surged this month to the highest level in almost six years, separate figures may show.

The housing rebound, gains in stocks and cheaper gasoline prices are boosting household finances and confidence, a sign consumers may keep shopping at stores such as Lowe’s Co. (LOW) and Kirkland’s Inc. Faster employment and wage growth would further underpin demand and make the world’s largest economy better able to withstand the federal budget cuts that began in March.

“The fact that consumer spending has held up in the face of the payroll tax increase and budget cuts is encouraging,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “It should really start to gain traction in the third quarter and beyond as the fiscal headwinds subside.”

The Commerce Department will release the spending report at 8:30 a.m. in Washington. Economists’ forecasts ranged from a drop of 0.3 percent to a gain of 0.4 percent. The data may also show incomes grew 0.1 percent following a 0.2 percent rise.

The Thomson Reuters/University of Michigan gauge of sentiment may have climbed in May to 83.7, the highest level since July 2007, economists in the Bloomberg survey projected ahead of figures due at 9:55 a.m. The forecast matches this month’s preliminary reading and follows 76.4 in April.

Economic Growth

Strength in consumer spending and business investment is helping the economy weather government cutbacks, revised first-quarter data showed yesterday. Gross domestic product rose at a 2.4 percent annualized rate, and household spending expanded 3.4 percent, the most since the last three months of 2010.

Purchases are being underpinned by gains in equity and housing markets. The Standard & Poor’s 500 Index (SPX), which reached a record on May 21, is up 16 percent since the start of 2013. The S&P/Case-Shiller index of home values in 20 U.S. cities advanced in the 12 months to March by the most in seven years.

Lowe’s, the second-largest U.S. home-improvement retailer, is among companies counting on a strengthening housing market to lift demand. The Mooresville, North Carolina-based chain said sales last month also recovered from a cold spring that sapped demand for outdoor items such as flowers and fertilizer.

More Progress

“We expect growth to remain modest through mid-year as consumers adjust to higher taxes and the fiscal drag intensifies,” Chief Executive Officer Robert Niblock said on a May 22 conference call with analysts. “However, we do expect that the lagged effect of recent gains in housing will benefit home-improvement demand as the year progresses.”

A drop in receipts at services stations, reflecting lower gasoline prices, probably restrained last month’s spending total, economists said.

The Commerce Department’s price index tied to spending, the gauge tracked by Federal Reserve policy makers, fell 0.2 percent in April as fuel costs retreated, according to the Bloomberg survey median. It would mark the biggest drop in almost a year.

Adjusting the April spending forecast for the decline in prices would yield a 0.2 percent increase in so-called real purchases -- which are the figures used to calculate GDP -- following a 0.3 percent gain in March.

Utility Bills

Consumers also probably had smaller utility bills last month as the weather turned warmer following the coolest March since 2002, helping curb total spending.

Kirkland’s (KIRK), a Nashville, Tennessee-based retailer of home accessories and furniture, reported sales climbed 3.5 percent in the first quarter ended May 4.

“Recent pockets of improvement in the housing market suggest a lift to consumer confidence and activity, especially for middle income consumers where housing has traditionally been a reservoir of wealth similar to the equity and bond markets for the more affluent,” Chief Executive Officer Robert Alderson said on an earnings call on May 23.

Employers hired a net 165,000 workers in May, the same as in April, economists projected ahead of the Labor Department’s payrolls report next week. The jobless rate probably held at a four-year low of 7.5 percent, they said.

                         Bloomberg Survey
================================================================
                              Pers     Pers  Chicago U of Mich
                               Inc    Spend       PM    Conf.
                              MOM%     MOM%    Index    Index
================================================================
Date of Release              05/31    05/31    05/31    05/31
Observation Period           April    April      May    May F
----------------------------------------------------------------
Median                        0.1%     0.0%     50.0     83.7
Average                       0.1%     0.0%     50.2     83.7
High Forecast                 0.3%     0.4%     53.8     85.8
Low Forecast                 -0.4%    -0.3%     47.5     81.5
Number of Participants          78       79       54       62
Previous                      0.2%     0.2%     49.0     83.7
----------------------------------------------------------------
4CAST                         0.3%     0.0%     51.0     82.7
ABN Amro                      ---      0.2%     49.0     83.7
Action Economics              0.1%    -0.1%     49.5     ---
Ameriprise Financial          0.2%     0.0%     49.8     84.0
Banca Aletti                  0.1%     0.2%     49.1     85.8
Bank of the West              0.1%     0.0%     49.5     83.7
Bank of Tokyo-Mitsubishi      0.1%     ---      51.0     83.0
Banorte-IXE                   ---      ---      49.8     84.2
Bantleon Bank AG              0.2%     0.0%     51.0     84.5
Barclays                      0.2%    -0.1%     50.0     83.0
Bayerische Landesbank         0.3%     0.1%     ---      83.3
BBVA                          0.2%     0.1%     ---      84.5
BMO Capital Markets           0.2%    -0.2%     50.0     83.8
BNP Paribas                  -0.1%    -0.1%     50.0     83.0
BofA Merrill Lynch            0.0%     0.0%     50.5     84.0
Capital Economics             0.3%     0.0%     ---      83.7
CIBC World Markets            0.0%     0.0%     ---      ---
Citi                          0.3%    -0.3%     51.0     83.5
ClearView Economics           0.1%     0.2%     47.5     83.9
Comerica                      0.2%     0.1%     ---      ---
Commerzbank AG                0.1%    -0.2%     50.0     ---
Credit Agricole CIB           0.1%     0.2%     ---      83.5
Credit Suisse                 0.2%    -0.1%     ---      84.0
Daiwa Securities America      0.1%     0.2%     ---      83.7
Danske Bank A/S               0.1%     0.1%     ---      83.7
DekaBank                      0.2%     0.1%     50.0     84.0
Desjardins Group              0.1%    -0.3%     51.5     83.7
Deutsche Bank Securities      0.1%     0.2%     51.0     85.0
Deutsche Postbank AG          ---      ---      ---      83.0
DZ Bank                       0.1%     0.0%     50.5     84.0
First Trust Advisors          0.2%     0.0%     49.9     83.7
FTN Financial                 0.1%     0.1%     ---      83.0
Goldman, Sachs & Co.          0.1%     0.1%     50.0     84.0
Helaba                        0.1%     0.1%     50.0     ---
High Frequency Economics      0.2%    -0.2%     51.0     84.5
HSBC Markets                  0.2%    -0.3%     52.5     84.0
Hugh Johnson Advisors        -0.2%     0.1%     53.8     84.0
IDEAglobal                    0.3%     0.4%     51.0     ---
IHS Global Insight            0.0%     0.0%     50.3     84.3
Informa Global Markets        0.1%     0.1%     49.6     81.5
ING Financial Markets         0.1%     0.2%     50.0     84.0
Intesa Sanpaolo               0.2%     0.1%     50.5     83.0
J.P. Morgan Chase             0.2%    -0.1%     ---      84.0
Janney Montgomery Scott      -0.2%     0.1%     ---      ---
Jefferies                     0.1%     0.0%     50.0     85.0
John Hancock Financial        0.2%     0.2%     ---      83.8
Landesbank Berlin             0.1%     0.2%     50.5     82.3
Landesbank BW                 0.0%     0.1%     48.5     83.7
Lloyds Tsb Bank               0.3%     0.2%     50.0     83.7
Market Securities             ---     -0.1%     ---      ---
MET Capital Advisors          0.0%     0.2%     ---      ---
Mizuho Securities            -0.4%     0.0%     48.0     85.0
Moody’s Analytics             0.2%     0.1%     50.5     84.0
Morgan Stanley                0.1%    -0.2%     ---      ---
National Bank Financial       0.0%     0.1%     ---      ---
Natixis                       0.2%     0.1%     ---      ---
Nomura Securities             0.2%     0.0%     48.6     ---
Nord/LB                       0.2%     0.2%     50.0     84.0
OSK Group/DMG                 0.2%     0.0%     ---      83.6
Oxford Economics              0.2%     0.1%     ---      ---
Pantheon Macroeconomic        0.3%    -0.2%     49.0     ---
Pierpont Securities           0.2%    -0.1%     ---      83.0
PineBridge Investments        0.3%     0.2%     52.0     82.0
PNC Bank                      0.1%    -0.2%     ---      ---
Raiffeisenbank International  0.2%    -0.1%     49.0     83.7
Raymond James                 0.1%    -0.1%     50.0     84.0
RBC Capital Markets           0.1%    -0.1%     51.0     82.0
RBS Securities                0.1%     0.0%     ---      ---
Regions Financial             0.1%    -0.1%     ---      ---
Renaissance Macro Research    0.1%     0.0%     50.0     83.7
Santander                     ---      ---      ---      83.9
Scotiabank                   -0.1%     0.1%     50.0     83.7
SMBC Nikko Securities         0.2%     0.4%     53.0     84.0
Societe Generale              0.2%    -0.2%     53.0     83.1
Standard Chartered Bank       0.1%     0.0%     49.5     84.2
Stone & McCarthy              0.1%     0.3%     48.5     83.0
TD Securities                 0.1%     0.0%     50.8     82.0
UBS                           0.1%    -0.3%     50.0     84.5
Union Investment              0.2%     0.1%     ---      83.7
University of Maryland        0.2%     0.1%     50.0     83.7
Wells Fargo & Co.             0.2%     0.2%     ---      ---
Westpac Banking Co.           0.1%     0.0%     ---      ---
Wrightson ICAP                0.1%    -0.2%     51.0     ---
================================================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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