US consumer spending held up in April as the Federal Reserve’s preferred inflation measure moderated last month, as policymakers remain on track to tighten more aggressively to relieve pressure on American households.
The core personal consumption expenditures (PCE) price index — an underlying gauge of inflation, which excludes the volatile food and energy segments — increased 4.9 per cent on a yearly basis in April, the commerce department said on Friday, down from 5.2 per cent the previous month.
That figure represents a cooling of the pace of inflation, which in February was growing at its fastest rate in four decades. Analysts polled by Refinitiv forecast that the core PCE would rise 4.9 per cent in April.
Still, annual inflation readings have been expected to fall as they lap the very elevated levels logged last year, however, Friday’s report showed on a month-on-month basis core PCE rose 0.3 per cent, little changed from March.
The commerce department said energy prices increased 30.4 per cent year-over-year while food prices rose 10 per cent. Overall, PCE rose 0.2 per cent month-on-month and 6.3 per cent from a year ago.
Despite persistent price pressures American households continued to spend at a robust pace, with household spending up 0.9 per cent in April.
“Amid rising pessimism about the state of the US consumer, today’s report provides some reassurance that the main pillar of the economy is still standing strong in the face of historic inflation and rising borrowing costs,” said Lydia Boussour, economist at Oxford Economics.
Fed officials are monitoring the inflation data, but are expected to implement another 0.5 percentage point rise to the benchmark policy rate in June, as the central bank moves policy to “neutral” territory where rates neither boost or slow the economy.
The Fed implemented a half point increase in May, after raising rates by a more typical quarter point in March, as policymakers aggressively tighten policy to stamp out inflation that pose a challenge to American households and US President Joe Biden’s administration.