US consumer spending rises but confidence falls

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Americans' willingness to open their wallets shot to a seven-year high in April, but confidence in the US economy fell in May.

US consumer spending jumped by 1% in April, the largest month-on-month gain since August 2009.

Consumer spending makes up two-thirds of US economic activity.

But in May, the consumer confidence index dipped to 92.6 from 94.7 in April, as Americans worried about the long-term outlook of the job market.

"Consumers remain cautious about the outlook for business and labour market conditions. Thus, they continue to expect little change in economic activity in the months ahead," said Lynn Franco, director of economic indicators at the Conference Board.

The rise in spending, though, has solidified many investors' belief that the Federal Reserve will raise interest rates when it meets in June.

Consumer spending was flat in March and rose by just 0.2% in February.

The positive news from April also included gains in wages, which rose 0.5%.

Spending on durable goods, which includes items such as cars, increased by 2.3%, while spending on non-durable goods, including clothing and food, climbed 1.4%.

Core inflation - which excludes food and energy prices - rose by 1.6%. The Fed has been closely monitoring inflation to determine when to raise interest rates and said it is targeting a goal of 2% inflation over the next few years.

At a speech on Friday, US Federal Reserve chair Janet Yellen said she expected the central bank would raise interest rates in the coming months.

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