US Consumer Spending Up, Inflation Rises

Consumer spending went up more than predicted in April in the United States, which is good news for the economy's growth in the second quarter. Inflation also increased which means the Federal Reserve may keep interest rates higher for a while.

Commerce Department reported that consumer spending increased by 0.8% last month. Data for March was also revised to show a gain of 0.1% instead of no change as previously stated. Economists had predicted spending to rise by only 0.4%. Consumer spending makes up a significant portion of the US economy.

Economists thought the economy would slow down, but people spent a lot of money last month. They spent the most in two years, but it was mostly in January. February and March were weaker, so spending will probably slow down in the next few months.

People are spending more money thanks to higher wages. This is due to there being fewer job openings. Things are looking up for the economy, with more factory production and business activity. In the first quarter, the economy only grew by 1.3%, but things are improving.

Consumer spending slowed after a surge in January. Americans are now more concerned about prices.

The government's social benefits are falling. Poor families used up their savings during COVID-19.

Credit has become costly due to a rise in interest rates by the Fed. This happened in March 2022 as they tried to control inflation, and they've increased rates by 500 basis points. The banks are also decreasing lending due to recent financial market instability.

The Fed's May 2-3 policy meeting minutes were released. The minutes showed that policymakers were unsure about the need for more rate hikes. They "generally agreed" that the situation was less certain. This suggests that the Fed may not be as aggressive with future rate hikes.

PCE price index went up by 0.4% in April. It had increased by 0.1% in March. The PCE price index went up by 4.4% in the past 12 months until April. It had gone up by 4.2% until March.

The PCE price index went up 0.4%, without food and energy. This rise was from a 0.3% increase in March. In April, the core PCE price index increased 4.7% from a year earlier. Before that in March, it had been up 4.6%. The Fed watches these price indexes to hit their 2% inflation goal.

Lucia Mutikani reported and Chizu Nomiyama edited.