Real Personal Spending Growth Slows As Fed's Favorite Inflation Gauge Heats Up

Following March's surprising surge in personal spending, April data was expected to slow (while incomes were expected to accelerate MoM) and did, but both incomes and spending beat expectations.

  • March spending was revised higher to +1.1% MoM (biggest MoM jump since Aug 2009) and April printed a better-than-expected +0.3% MoM.

  • March incomes rose a better-than-expected 0.5% MoM.

Additionally, on a year-over-year basis, income growth picked up and spending slowed...

And notably, Real Personal Spending was unchanged in April, after a big surge in March...

And a crucial measure of U.S. inflation watched by the Federal Reserve picked up in April for the first time this year. The Fed’s preferred core price gauge -- tied to spending and excluding food and energy -- rose 0.2% from the prior month and 1.6% from a year earlier following a downwardly revised 1.5% in March.

As Bloomberg notes, the rise in core inflation toward the Fed’s 2% target may help support Chairman Jerome Powell’s view that transitory factors had temporarily restrained the gauge while bond markets bet that price gains will stay muted.