WASHINGTON (Reuters) – U.S. consumer spending rose more than expected in April, boosting the economy’s growth outlook for the second quarter, and inflation picked up, which could prompt the Federal Reserve to keep interest rates on hold. a while deeper.
Consumer spending rose 0.8% last month, the Commerce Department reported on Friday. Data for March was revised to show an increase of 0.1%, instead of the change as previously reported. Economists polled by Reuters had forecast that consumer spending, which accounts for more than two-thirds of US economic activity, would rise 0.4%.
Growth in consumer spending last month moderated economists’ expectations of a sharp slowdown this quarter. Although spending accelerated at its fastest pace in nearly two years in the first quarter, much of the growth contracted in January. Weakness in consumer spending in February and March put the growth trajectory on the lower side heading into the second quarter.
Consumer spending is supported by strong wage growth in a tight job market. The recovery of the labor market, the impact on industrial production and the reactivation of business activity, suggest that the economy is picking up speed after growing at an annual rate of 1.3% in the first quarter.
Still, consumer spending slowed after the January rally as Americans became increasingly price sensitive.
Government welfare benefits are also declining and lower-income families are believed to have depleted savings accumulated by the covid-19 pandemic.
Credit has also become much more expensive after hikes in the federal reserve interest rate by a total of 500 basis points from March 2022, when the central bank launched its fastest monetary tightening policy since the 1990s. 1980 to contain inflation.
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Banks are also tightening credit after the recent turmoil in the financial markets.
Minutes of Hed’s May 2-3 policy meeting, released Wednesday, show central bank officials “generally agree” on the need for further hikes to “become less certain.”
The personal consumption expenditures (PCE) price index rose 0.4% in April, after rising 0.1% in March. In the 12 months to April, the PCE price index grew 4.4% after advancing 4.2% in March.
Excluding the volatile food and energy sectors, the PCE price index rose 0.4% after rising 0.3% in March. The so-called core PCE price index rose 4.7% year-on-year in April, after 4.6% in March. The Federal Reserve tracks the PCE price index to reach the target of 2% growth.
(Narrative by Lucia Mutikani, published in Spanish by Manuel Farías)