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Consumer Spending at Lowest in Seven Months

WASHINGTON -- Consumer spending was stagnant in April, the weakest showing in seven months, and countered 0.4-percent rise in April retail sales, according to a Commerce Department report cited by The Associated Press. The flat level of spending came after a 0.6-percent rise in March.

Meanwhile, incomes posted a miniscule gain, of 0.4 percent, both signaling the economic recovery could slow, the report stated.

The rise in personal incomes was in line with expectations, but not enough to help generate real growth, the AP reported. More people are saving money, and the savings rate rose 3.6 percent in April, after falling to 3.1 percent in March, the lowest reading since October 2008, according to the report.

"The lesson here is that relatively strong retail sales numbers do not guarantee robust consumption," Ian Shepherdson, chief U.S. economist at High Frequency Economics, said in the report, noting retail sales account for only two-fifths of spending.

Retail business in May is below expectations, due to cool weather and swings in the stock market, according to the International Council of Shopping Centers, which was cited in the AP report.

Although April showed no growth in spending, economists expect consumer spending to grow at a pace of around 3 percent in the current quarter, slightly down from spending growth of 3.5 percent in the first three months of the year, the strongest level in three years, the AP reported.

"The fall in energy prices and a surge in mortgage refinancing has left households with more cash to spend on other items," Paul Dales, U.S. economist at Capital Economics, said in the report.

And tame inflation could encourage additional spending. Prices did not increase in April and are up 2 percent over the past year, according to an inflation measure tied to consumer spending that was cited by the AP.

Despite adding 290,000 jobs in April, the jobless rate jumped to 9.9 percent as people who had given up on job searches resumed their quest. High unemployment could dampen spending going forward, limiting the pace of the economic recovery, according to the report.

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