CHICAGO, April 30: US consumers turned a bit more glum about the future in April as they struggled with record gasoline prices and sluggish wage growth, reports showed on Friday. Separate reports showed Midwestern manufacturing ticking along at a faster-than-expected rate this month, and consumer spending — and inflation — higher in March.

Economists said the day’s data did little to change the outlook for interest rates when the Federal Reserve’s policy-making Open Market Committee meets on Tuesday.

The personal consumption expenditures, or PCE, price index, rose 0.5 per cent in March after climbing 0.3 per cent in February, further evidence of price pressures in the economy. The data supported expectations the Fed will raise overnight rates by a quarter-percentage point, to 3 per cent, with another increase likely in June.

The University of Michigan’s closely watched measure of consumer sentiment fell in April to 87.7 from 92.6 in March. Assessments of current conditions and future expectations both slipped on the month, and expectations are riding a four-month decline to their lowest level since March 2003.

Consumers need some relief from high gasoline prices, mediocre job markets and volatile equity markets in order to feel more optimistic about the economy, said Steven Wood, economist at Insight Economics.

Economists caution that the link between consumer confidence and consumer spending is sometimes tenuous, with Americans spending even at times of worry. Still, many draw at least a dotted line from declining confidence to softness in consumer spending, the engine that drives two-thirds of U.S. economic activity.

US markets mostly ignored the day’s data, but equities logged strong gains late in the session after crude oil prices tumbled below $50 per barrel to a 10-week low close. That in turn boosted Treasury yields.

The Dow Jones industrial average .DJI> closed up 1.2 Per cent at 10,192 but was still down 3 percent in April, its worst month on a percentage basis since January 2003. The Commerce Department said on Friday that US consumer spending rose 0.6 per cent in March. But rising inflation accounted for most of the gain, and after taking that into account, personal spending edged up just 0.1 per cent last month.

March was a tough month and consumers grew cautious, said Mark Zandi, chief economist at Economy.com in West Chester, Pennsylvania. Inflationary pressure is edging higher and that’s evident in higher prices we are paying for gasoline and energy.

Stripping out food and energy prices, the core PCE index, the Fed’s favoured inflation measure, rose 0.3 per cent, topping its 0.2 per cent February gain. Year over year, the price index for personal consumption was up 2.4 per cent, versus an increase of 2.2 per cent in February.

The core PCE will presumably become the most critical statistic for the FOMC in forming their future policy decisions, said Brian Fabbri, managing director of economic research at BNP Paribas.

Purchases of durable goods — costly items meant to last three years or more — rose 2.2 per cent in March and accounted for the bulk of the pickup in consumer spending.

The US personal saving rate dipped to 0.4 per cent in March from February’s 0.5 per cent, hitting its lowest level since October 2001.

At the same time, first-quarter worker compensation posted the smallest increase in six years, just 0.7 per cent, as hefty bonuses paid on Wall Street at the turn of the year evidently were not matched on Main Street.

The rise in the Employment Cost Index, a broad gauge of what employers pay in wages and benefits, slowed from the 0.8 percent advance in the final three months of 2004, even though the index typically rises more in the first quarter.

Salaries and wages rose 0.6 per cent in the January-March period. That held the 12-month rise steady at 2.4 per cent — the smallest advance since the series began in the early 1980s — for a third straight quarter.

Gary Thayer, chief US economist at A. G. Edwards & Sons, in St. Louis, saw a silver lining in that data. With some moderation of employment costs, companies are more likely to continue to increase hiring, he said.

The National Association of Purchasing Management-Chicago said its business barometer slipped in April to 65.6 from 69.2 but still outpaced market expectations of a more severe drop driven by cutbacks in auto production.

The (General Motors) slowdown was expected to have a larger impact; the total effect most likely will be felt next month, said Chris Low, chief economist at FTN Financial.

Results in the relatively industrialized Midwest bode well for a strong reading on national factory activity, due on Monday, economists said. Also on Friday, NAPM-New York showed business conditions in the Big Apple region improved markedly in April, especially in the city’s vast services sector.—Reuters