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U.S. Personal Spending Stayed Strong in April as Inflation Edged Lower

Economic Indicators May 27, 2022 08:40AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- U.S. consumers kept spending in April, amid fresh signs that, at least in annual terms, inflation may have peaked for the current cycle.

The figures are a reminder of the broad momentum in the U.S. economy, despite a clutch of headline-grabbing reports from the retail sector over the last couple of weeks that have shown signs of consumer demand - the traditional engine of U.S. growth - weakening. 

"This isn't the onset of a recession," said EY chief economist Greg Daco via Twitter.

Personal spending rose by a stronger-than-expected 0.9% in the month. That was a slowdown from March, but March's data were also revised higher to show a gain of 1.4%, rather than the initially reported 1.1%. Spending outstripped expectations even though personal income growth slowed for the second month in a row. Income rose only 0.4%, less than the 0.5% posted in March. Analysts had expected it to keep growing at the same pace.

At the same time, the annual rate of inflation, as measured by Personal Consumer Expenditures, eased slightly to 6.3% from a 40-year high of 6.6% in March, while the core index fell to 4.9% from 5.2%. In monthly terms, core PCEs rose 0.3%, in line with expectations.

"The consumer spending boom continues," said Jason Furman, a senior fellow with the Peterson Institute in Washington D.C. He noted that adjusted for inflation, consumer spending rose 0.7% in April.

"Even if it is flat in May & June, (it) will be (a) 4.1% annual rate for Q2," Furman argued, pointing to the ongoing process of consumers running down their pandemic-era savings. In the last eight months, the U.S. personal savings rate has fallen from 8.1% of income to only 4.4%, its lowest since the 2008 financial crisis.

Inflation and growing cost-sensitivity by consumers have nonetheless weighed heavily on the stock market in recent weeks, with retailers from Walmart (NYSE:WMT) to Gap (NYSE:GPS) and Big Lots (NYSE:BIG) all missing forecasts and lowering their outlooks for the year.

U.S. Personal Spending Stayed Strong in April as Inflation Edged Lower
 

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Comments (19)
Venkateswarlu Karanam
Venkateswarlu Karanam May 28, 2022 12:19PM ET
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personsl spending at .9 percent, slow growth in personal income at 0.4 percent, high drop from 8.4 to 4.4 percent in personal savings. peak inflation. intetest rates at the initial stage of uptrend.what does it mean. consumers spending at the cost of savings not at the cost of income. if trend continues, consumer spending will be down in real terms. high energy and commodity prices will destroy the economies. govts should focus on reducing the prices to bring back the economy. some countries planning to collect tax on wind fall profits from corporates to stabilise the economies.
Kailesh Mistry
Kailesh Mistry May 27, 2022 10:53AM ET
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Savings at 2008 lows yet consumers are still spending. This will fall off a cliff very soon!
First Last
First Last May 27, 2022 10:53AM ET
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Went has the consumers ever not spend?
Art Carrano
Art Carrano May 27, 2022 10:36AM ET
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Test
Jack Nicholson
Jack Nicholson May 27, 2022 10:27AM ET
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so buy more puts today before they change the headline ;o)
Kerry Ditto
Kerry Ditto May 27, 2022 10:14AM ET
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As George Soros alluded, end of world might be near.
Márcio Ramos
Márcio Ramos May 27, 2022 10:14AM ET
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for those who die...
Kerry Ditto
Kerry Ditto May 27, 2022 10:10AM ET
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75 bps hike is back on the table.
Amy Canfield
Amy Canfield May 27, 2022 10:00AM ET
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There is no way inflation peaked in california . Gas is over 6$ a gallon here
ZS Beck
ZS Beck May 27, 2022 10:00AM ET
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It's slowing, not peaking.
neang aee 냥에
neang aee 냥에 May 27, 2022 9:52AM ET
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Yes it's right time to taper and raise
dar dar
dar dar May 27, 2022 9:46AM ET
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forgive me but it's all Kabuki theater
Dennis Wozny
Dennis Wozny May 27, 2022 9:29AM ET
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Nonsense. Data spin to create a fake sense of positive direction. We heade full steam ahead into a recession
Alan Goldblatt
Alan Goldblatt May 27, 2022 9:29AM ET
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Who is responsible for creating the fake spin?
Márcio Ramos
Márcio Ramos May 27, 2022 9:29AM ET
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Alan Goldblatt  must fire them all who ever they are!!!
Khoa Phan
Khoa Phan May 27, 2022 9:29AM ET
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couldn't agree more.
Todd Holaday
JustWilliam May 27, 2022 9:29AM ET
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The data is the data. The permabears that infest the comment boards seem to not want to just look at it. Recession always eventually comes. Why do some insist on having it this second.
 
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