US consumer spending, incomes grew solidly in April
- Author: Zachary Reyes May 30, 2017,
May 30, 2017, 21:07
The figure is one of the most important gauges of economic stability, with consumer spending accounting for more than two-thirds of U.S. economic activity.
The 1.2 per cent GDP growth rate in the first quarter was far below the targets set by President Donald Trump.
Americans increased their spending in April at the fastest pace in four months, bolstered by a solid gain in incomes.
April's increase was the biggest since December, alleviating worries over an initial slowdown in the first quarter of the year and easing concerns about second-quarter economic growth going forward. Consumer spending was previously reported to have been unchanged in March. That was the worst performance since late 2009 and helped contribute to a lackluster 1.2% annual growth rate in the first quarter.
However, although economy slowed less than first thought in the first quarter, reduced business investment and consumer spending mean that any expectations of a sharp rise in growth in the second quarter are unlikely to come about.
USA stock index futures pared losses after the data while the dollar edged up against the yen. The dollar.DXY dipped against a basket of currencies while USA government bond prices rose.
The Fed has signalled it likely will raise rates again "soon", believing recent slow growth was only temporary, and most analysts expect a rate hike at the next policy meeting Jun 13-14.
The fresh sign of tepid price increases could lessen pressures on the central bank to raise interest rates when policymakers meet next month. Consumer spending is being boosted by a tightening labor market, which is gradually pushing up wages.
In a separate report on Tuesday, the Conference Board said its consumer confidence index slipped to a reading of 117.9 in May from 119.4 in April.
Inflation as measured by the PCE index, meanwhile, rose 0.2% in April, as did another "core" measure that strips out food and energy. Incomes also rose 0.4 per cent, double the 0.2 per cent March increase.
The core PCE is the Fed's preferred inflation measure. Incomes also rose 0.4 percent, double the 0.2 percent March increase.
Savings were little changed at $759.1-billion last month. Real personal spending in March was revised up to 0.5% from 0.3%.