Purchases of goods and services increased 0.7% since March, according to data from the Commerce Department
A person shops at a butcher shop in Manhattan, New York, United States, on March 29, 2022. REUTERS/Andrew Kelly
Inflation-adjusted consumer spending in the United States posted the biggest increase in three months in April, indicating that households withstood persistent price pressures by dipping into savings.
Purchases of goods and services, adjusted for price changes, rose 0.7% from March, data from the Commerce Department showed on Friday. Both spending on goods and services rose in April.
The personal consumption expenditures (PCE) price index, which the Federal Reserve uses to set its inflation target, rose 0.2% from the previous month and 6.3% from April 2021. The core PCE price index rose 0.3% for a third month.
Median forecasts in a Bloomberg survey a economists estimated a 0.7% increase in spending adjusted for inflation from the previous month and a 6.2% increase in the price index from April 2021.
People shop at a grocery store in Manhattan, New York, United States, on March 28, 2022. REUTERS/Andrew Kelly
Not adjusting for inflation, spending rose 0, 9% from the previous month, while revenue increased by 0.4%.
The figures underscore expectations that the Spending to remain healthy in the second quarter as consumers continue to be supported by strong job growth and accumulated savings. The slowdown in inflation during the month partly reflected a drop in gasoline prices.
While annual inflation is cooling, it remains three times higher than the Fed’s 2% target and helps explain why policymakers are pushing for half-point increases in interest rates at upcoming meetings.
PHOTO BY FILE, ARCHIVE. An eagle on the facade of the Federal Reserve headquarters in Washington, July 31, 2013. REUTERS/Jonathan Ernst
However, household purchases risk moderating asGasoline prices are back at record levels and grocery prices are having a bigger impact on budgets. The strain was evident in a drop in the April savings rate to the lowest level since 2008, as well as a rebound in consumer borrowing.
Core inflation
In addition to the headline inflation figure, the core PCE price index, which excludes food and energy and is often considered a more reliable guide to core inflation , increased 4.9% from a year earlier, compared to 5.2% in March.
Inflation-adjusted spending spending on goods rose 1% from the previous month, led by motor vehicles, while spending on services rose 0.5%. Unadjusted for inflation, the increase in service spending in April was led by components including food, lodging and housing services, according to the Commerce Department.
( With information from Bloomberg)