“The average consumer is in a worse place than they were a year ago, in terms of spending,” Sofia Baig, economist at decision intelligence company Morning Consult, told CNN. There are some indications that the economy is weakening: Growth is slowing and consumer spending is softer than it was last year amid persistently high inflation, increasing interest rates and rising recession concerns. And if we start to see prices go up more, which suggests they’re going to have to do more, I think it’s going to be very difficult to maintain that delicate balancing act.” “It doesn’t seem to have caused a recession yet, but I think we’re dancing on the edge. “We’re walking a very fine line now, with a fairly rapid rate of interest rate increases,” she said. ![]() 'It's going to be catastrophic:' The debt ceiling standoff is worrying for some Americans Visitors outside the US Capitol building in Washington, DC, US, on Tuesday, May 23, 2023. The Fed hopes to meet its mandate without triggering a recession, but it’s a “delicate” process, she said. However, if there are hiccups along the way and inflation accelerates, then it may mean that more aggressive policy is warranted, Veldkamp said. The deeply embedded and persistent inflation has been expected to come down slowly. “Inflation has taken on a life of its own.” “We’ve said we went back to normal, but the problem is, that doesn’t mean inflation immediately goes back to normal,” Laura Veldkamp, finance professor at Columbia University’s Graduate School of Business, told CNN in an interview. A little more than an hour later, those odds shifted to a 58.5% probability of a quarter-point hike next month. Just before the Commerce Department data was released on Friday, markets had the probability of a Fed pause at 54.2%, according to CME FedWatch. They also signaled that a pause could be on the table in June as they continued to evaluate the effects from the barrage of rate hikes as well as banks tightening their lending standards amid broader sector turmoil. Since March last year, the Fed has hiked its benchmark interest rate 10 consecutive times as part of efforts to cool demand and bring down high inflation.Īt the central bank’s policymaking meeting earlier this month, Fed officials voted unanimously on a quarter-point rate increase. He added: “It is critical that inflation moderate further, otherwise the Fed will continue to increase rates, which will ultimately undermine the economy and push it into recession.” “It is encouraging that the cost of housing services is moderating, reflecting weaker rents but health care inflation is picking up, reflecting a tight health care labor market and quickly rising labor costs.” “Inflation has peaked and is moderating, but it remains much too high,” said Mark Zandi, Moody’s Analytics chief economist, in an email to CNN. Household income ticked up to 0.4% from March the prior month, personal income grew 0.3%.Īs spending increased faster than incomes, the personal saving rate fell to 4.1% in April. Excluding the effects of inflation, real consumer spending increased 0.5%, reflecting a boost seen from new car purchases, according to the report. The PCE indexes are part of the Personal Income and Outlays report, which provides a more comprehensive look at shifts in prices, including how consumers respond to them and how much consumers are spending, bringing in and saving.Ĭonsumer spending jumped 0.8% in April from March, double what economists had expected. In March, the headline PCE index showed a 0.1% gain, while core accelerated by 0.3%.Įconomists polled by Refinitiv were expecting April’s monthly core price to increase 0.3%. ![]() On a monthly basis, the headline and core indexes were both up 0.4%. In March, the core PCE gauge grew by 4.6%.Įconomists had forecast that core PCE would hold steady at 4.6%, according to Refinitiv. ![]() The closely watched core PCE index - where volatile components of food and energy are excluded - unexpectedly ticked up: The Fed’s go-to gauge was up 4.7% for the year. Rising energy prices (up 0.7% month on month) helped push up the headline PCE index prices for goods and services increased 0.3% and 0.4%, respectively, while food prices showed a very slight decrease. The Personal Consumption Expenditures price index rose 4.4% for the 12 months ended in April, up from a 4.2% increase seen in March, according to data released Friday by the Commerce Department. The Federal Reserve’s preferred inflation gauge bounced higher in April, underscoring Fed Chair Jerome Powell’s warnings that reining in price hikes “is likely to be bumpy.” But with spending also heating up, Friday’s data from the Commerce Department kicked up the odds for further rate hikes. The US economy has encountered some expected turbulence on inflation’s descent.
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