Bloomberg Rising incomes are helping consumers.
The numbers: Americans cut back on spending in April after splurging in March, but rising incomes suggest consumers still have plenty of buying power to support the U.S. economy in the face of strengthening headwinds.
The rate of inflation, meanwhile, remained very low despite a sharp increase in prices in April.
Consumer spending rose 0.3% last month, the government said Friday, a tick above the MarketWatch forecast. Outlays had surged by a revised 1.1% in March to mark the biggest increase in 10 years, so some letup was expected.
Incomes rose 0.5% in April — the largest gain in four months. Incomes are rising at the fastest pace since the end of the Great Recession.
A closely watched measure of inflation rose in April but remained quite mild. The PCE index climbed 0.3%, or 0.2% when food and energy are stripped out.
The rate of inflation over the past year rose a notch to 1.5%. While that’s the highest level since December, it’s still well below the Federal Reserve’s 2% target.
The core rate advanced at a 1.6% yearly pace, a tick higher than in March.
What happened: Americans spent less in April on durable goods such as new cars and trucks, but they increased purchases of more perishable products as well as services such as utilities.
Since incomes rose faster than spending, the savings rate edged up to 6.2% from 6.1%.
Big picture: The U.S. economy is basically sitting in the middle lane of a highway. It’s unlikely to generate enough speed to justify a shift into the fast lane or slow down so much that it will be shunted to an off-ramp.