WASHINGTON -- Consumers pulled their wallets out of winter hibernation in April, increasing their spending at the fastest pace in nearly seven years in a sign that the economy is growing solidly again this spring.
Personal consumption expenditures grew by 1 percent after being flat in March and posting small gains the previous two months, the Commerce Department said Tuesday.
A jump in purchases of motor vehicles and long-lasting durable goods helped fuel the rise.
The last time consumer spending increased at a faster pace was in August 2009, just after the official end of the recession.
Consumers started the year's second quarter "with a bang," said Stuart Hoffman, chief economist at PNC Financial Services.
"Consumer spending will continue to lead economic growth in 2016, as more jobs and rising wages give households more money to spend," he said.
Another solid month of income growth was a key to the jump in spending. Consumers had more money in their pockets and regained confidence after financial markets rebounded from steep declines at the start of the year.
Personal income increased 0.4 percent in April, the third such gain in four months, the Commerce Department said.
Instead of saving the extra income, as they had earlier this year, consumers spent it in April. The percentage of disposable income saved dropped to 5.4 percent from 5.9 percent the previous month.
The last time the savings rate was lower was in December.
"For all the concern about income inequality and stagnant wages, the economy overall is generating a lot of income for people," said Chris Rupkey, chief financial economist at Union Bank in New York. "And they are spending it."
The increased spending led to a rise in inflation. The price index for personal consumption expenditures increased 0.3 percent in April after a 0.1 percent gain the previous month.
For the 12 months ending April 30, prices increased 1.1 percent. That was the highest 12-month pace since January.
Federal Reserve policymakers want annual inflation to be 2 percent. Signs that inflation is moving toward that target, along with other data showing an improving economy, make it more likely Fed officials will nudge up a key interest rate this month.
Analysts have forecast that economic growth would rebound this spring after a weak winter.
On Friday, the Commerce Department said the economy grew at a 0.8 percent annual rate in the first quarter, an improvement from the initial estimate of 0.5 percent. Growth is expected to rebound to nearly 3 percent in the second quarter. Tuesday's consumer spending figures for April showed that the quarter got off to a strong start.
"Net, net, consumers picked up the pace in April so you know the entire economy cannot be too far behind," Rupkey said.
In a seemingly conflicting report, the Conference Board said Tuesday that U.S. consumer confidence fell in May to the lowest level since November.
The Conference Board's index of consumer confidence slipped to 92.6 from 94.7 in April. The May reading matched the level in November. Both months were the lowest since last July.
Conference Board economists said consumers remain cautious about the outlook for business and job market conditions, and anticipate little change in the months ahead.
The reading from the Conference Board stands in contrast to the University of Michigan's consumer sentiment gauge, which rose in May to its highest reading in nearly a year.
Analysts said the Michigan measure tends to be more volatile than the Conference Board survey. It is more influenced by changes in the stock market, while the Conference Board index has a greater link to job market conditions.
The Michigan survey may be giving a better read on consumers' mood at the moment, considering the consumer spending report data, analysts said.
"It's difficult to explain when the economic data go one way and surveys go another," said Jennifer Lee, senior economist at BMO Capital Markets. "The confidence data suggest that consumers remain cautious, but if job growth keeps up and wage growth heads higher, we should see personal spending continuing to provide the muscle behind the U.S. economy."
A third report released Tuesday showed a continued rise in U.S. home prices in March as the spring home-buying season began.
The Standard & Poor's/Case-Shiller 20-city home price index increased 5.4 percent in March compared with a year earlier. That is the same annual gain as in February.
Solid job growth, modest increases in wages and salaries, and low mortgage rates are fueling Americans' willingness to buy homes. Yet there is also a limited supply of homes on the market, which pushes up prices.
David Blitzer, chairman of the S&P index committee, said the number of homes on the market is equal to less than 2 percent U.S. households, the lowest percentage since the mid-1980s.
The number of available homes fell 3.6 percent in April, according to the National Association of Realtors.
"It remains a tough home-buying season for buyers, with little inventory available among lower-priced homes," said Svenja Gudell, chief economist at real estate data firm Zillow. "The competition is locking out some first-time buyers, who instead are paying record-high rents."
Information for this article was contributed by Jim Puzzanghera of the Los Angeles Times and Martin Crutsinger and Christopher S. Rugaber of The Associated Press.
Business on 06/01/2016