WASHINGTON (Reuters – U.S. household spending rose more than expected in April, boosting growth prospects for the world’s largest economy in the second quarter, and inflation has picked up, which could prompt the Federal Reserve to maintain high interest rates for a while.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.8% in adjusted data last month, the Commerce Department said on Friday.
Economists polled by Reuters on average had expected a lower rise of 0.4%.
Data for March have been revised upwards to show an increase of 0.1%, instead of the stagnation initially announced.
The increase in consumer spending in April tempers economists’ expectations of a sharp slowdown in the economy for the current quarter. Although spending accelerated to its fastest pace in nearly two years in the first quarter, most of the growth was concentrated in January.
Households curbed spending in February and March due to inflation, cuts in government social benefits and a drop in savings accumulated during the COVID-19 pandemic.
The PCE consumer price index increased by 0.4% in April after +0.1% in March. Its increase over one year was 4.4% after +4.2%.
The Federal Reserve’s closely watched core PCE inflation index, which excludes volatile energy and food items, rose 0.4% after rising 0.3% in March. Over one year, its increase was 4.7%, against 4.6% a month earlier.
(Report by Lucia Mutikani; Gaëlle Sheehan, edited by Laetitia Volga)
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