US consumer spending rose more than expected in April, while annual inflation appears to have peaked, which could help sustain economic growth in the second quarter amid mounting recession fears.
Consumer spending, which accounts for more than two-thirds of US economic activity, rose 0.9% last month, the Commerce Department said on Friday.
March data was revised up to 1.4% up from 1.1% as previously reported.
Economists polled by Reuters had forecast a gain of 0.7%. Spending is being supported by strong wage gains, with companies struggling to fill a record 11.5 million job openings that were open at the end of March.
The Federal Reserve’s monetary policy, which is struggling to contain high inflation and bring it back to its 2% target, has fueled worries of a recession, triggering a sell-off in equities and a rise in yields on Treasuries and the dollar.
Fears of an economic downturn have also been exacerbated by Russia’s war on Ukraine, as well as China’s Covid-zero policy, which has further affected supply chains.
The US central bank has raised interest rates by 0.75 percentage point since March. The Fed is expected to raise the rate by 0.5 percentage point at each of its next meetings in June and July.
Growth estimates for the second quarter are mostly above an annualized rate of 2.0%. The economy contracted at a 1.5% pace in the January-March quarter, pressured by a record trade deficit and slower inventory build-up from the robust fourth-quarter rate.
While inflation continued to rise in April, it was not at the same magnitude as in recent months. The PCE index rose 0.2% last month, after having soared 0.9% in March.
In the 12 months through April, the index rose 6.3% after having jumped 6.6% in March.
PCE’s annual rise is slowing as last year’s big jumps fall out of the equation.
Excluding the volatile food and energy components, PCE rose 0.3%, advancing by the same margin for three consecutive months.
The so-called core PCE rose 4.9% year-on-year in April, after rising 5.2% in March. It was the second consecutive month that the annual rise has slowed.
Source: CNN Brasil
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