Consumer spending stalls in the US

US consumer spending unexpectedly stalled in April as households cut on purchases of cars and continued to boost savings, suggesting the economy was struggling to gain momentum early in the second quarter.

However, there are signs a rebound is under way, with other reports showing manufacturing activity picked up in May for the first time in seven months as construction spending surged in April to a near six and a half-year high.

Still, soft consumer spending and muted inflation pressures, after a price index for consumer spending in April recorded its smallest gain since late 2009 on an annual basis, suggest the Federal Reserve will probably not raise interest rates before the end of the year.

The commerce department said April’s flat reading in consumer spending followed a 0.5% rise in March.

Consumer spending, which accounts for more than two thirds of US economic activity, was also curbed by weak demand for utilities as temperatures warmed up. It had been forecast rising 0.2%.

In a separate report, the Institute for Supply Management said its national factory activity index rose to 52.8 last month from 51.5 in April. The index had been declining since November as manufacturing battled a strong dollar and deep spending cuts in the energy sector. A reading above 50 indicates expansion in the manufacturing sector, which accounts for about 12% of the US economy.