Gas Prices Squeeze Consumer Spending Despite Tax Refund Boost

In April, Americans curtailed their spending as gas prices surged in the wake of the Iran war, leaving less money for nonessential items like clothing and furniture. While consumer spending remains healthy due to generous tax refunds, economists warn that it might decline as the gas price pinch continues to hurt wallets.

Retail sales saw a modest rise of 0.5% in April, a deceleration compared to the previous month's revised growth of 1.6%, according to the Commerce Department. The reduced spending followed a historic March increase driven largely by a sharp rise in gas prices, which overshadowed spending on other goods.

The ongoing conflict in Iran has resulted in the closure of the Strait of Hormuz, cutting off a significant portion of the global oil supply, further exacerbating gas prices. This, coupled with dwindling tax refunds, poses a challenge to consumer spending in the coming months, experts predict.

(With inputs from agencies.)