U.S. retail sales increased marginally in April as rising gasoline prices cut into discretionary spending, but consumer spending appeared on track to accelerate after slowing sharply in the first quarter.

The economic outlook got a boost from other data on Tuesday showing factory activity regaining momentum in May on strong orders growth. While manufacturers reported paying more for raw materials, they were absorbing much of the higher costs, a sign inflation will probably continue to increase at a moderate pace.

“A better pace of real consumer spending growth is taking hold in the second quarter,” said Scott Anderson, chief economist at Bank of the West in San Francisco. “However, rising fuel costs may be sapping gains in other spending categories.”

The Commerce Department said retail sales rose 0.3 per cent last month after surging 0.8 per cent in March. April’s increase was in line with economists’ expectations. Retail sales in April advanced 4.7 per cent from a year ago.

Excluding automobiles, gasoline, building materials and food services, retail sales rose 0.4 per cent last month after increasing 0.5 per cent in March. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Economists estimated that consumer spending, which accounts for more than two-thirds of U.S. economic activity, was growing at a 2.5 per cent annualized rate early in the second quarter. Consumer spending grew at a 1.1 per cent pace in the January-March quarter, which was the slowest in nearly five years.

The economy expanded at a 2.3 per cent rate in the first quarter. Growth is expected to accelerate to a 3.0 per cent pace in the April-June period.

In a separate report, the New…