U.S. data points to weaker economic momentum

Mon Apr 30, 2012 12:40pm EDT
 
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By Jason Lange

WASHINGTON (Reuters) - The U.S. economy appeared to downshift as it entered the second quarter, with consumers increasing their spending only modestly last month and a gauge of business activity in the Midwest falling sharply in April.

Consumer spending rose 0.1 percent in March from a month earlier when taking inflation into account, the Commerce Department said on Monday.

Separately, a report from the private Institute for Supply Management-Chicago showed business activity cooled much more than expected in the Midwest during April.

"The economy is losing a little momentum," said Gary Thayer, a macro strategist at Wells Fargo Advisors in St. Louis.

The U.S. recovery had already slowed substantially in the first quarter as businesses cut back on investment and restocked shelves at a slower pace, data on Friday showed. Gross domestic product expanded at a 2.2 percent annual rate in the first three months of the year compared to 3 percent in the fourth quarter.

Stronger consumer spending cushioned the blow, but Monday's data suggested consumers ended the quarter spending less freely.

Consumer spending climbed 0.3 percent, just below the median forecast in a Reuters poll, but inflation ate up most of that gain. "The higher gas prices we saw last month are taking their toll," said Todd Schoenberger, managing principal at the Black Bay Group in New York.

After-tax income climbed 0.2 percent when accounting for higher prices, the Commerce Department said.   Continued...

 
A shopper is shown a camera in an electronics store in Falls Church, Virginia May 28, 2010. REUTERS/Kevin Lamarque