U.S. consumer spending held steady in April as the Federal Reserve’s preferred inflation measure moderated last month, as policymakers remain on track to tighten more aggressively to ease pressure on American households.
The Personal Consumption Expenditure (PCE) core price index – an underlying indicator of inflation, which excludes the volatile food and energy segments – rose 4.9% on a annual basis in April, the Commerce Department said Friday, down from 5.2% the previous month.
The figure represents a slowdown in the pace of inflation, which in February was rising at its fastest pace in four decades. Analysts polled by Refinitiv expect core PCE to rise 4.9% in April.
Still, annual inflation readings are expected to fall as they top the very high levels seen last year, however, Friday’s report showed on a month-to-month basis that core PCE rose 0.3% , little changed from March.
The Commerce Department said energy prices rose 30.4% year over year, while food prices rose 10%. Overall, PCE was up 0.2% month over month and 6.3% from a year ago.
Despite lingering price pressures, US households continued to spend at a healthy pace, with household spending rising 0.9% in April.
“Amid growing pessimism about the state of the U.S. consumer, today’s report provides reassurance that the mainstay of the economy is still strong in the face of historic inflation and rising costs. borrowing,” said Lydia Boussour, an economist at Oxford Economics.
Fed officials are monitoring inflation data but are expected to implement another 0.5 percentage point hike in the benchmark policy rate in June as the central bank shifts policy to ‘neutral’ territory where rates neither stimulate nor slow the economy.
The Fed made a half-point hike in May, after raising rates a more typical quarter-point in March, as policymakers aggressively tighten policy to stamp out inflation that is challenging investors. American households and the administration of US President Joe Biden.