U.S. consumer spending increased more than expected in April, boosting the economy's growth prospects for the second quarter, and inflation picked up, which could prompt the Federal Reserve to raise interest rates again next month.
in suggesting the economy was experiencing a spring revival after hitting a speed bump in the first quarter. They also increased the chances that the U.S. central bank would hike rates in June., which were published on Wednesday, showed policymakers "generally agreed" the need for further rate hikes "had become less certain."
Consumers stepped up purchases of new light trucks and spent more on pharmaceutical products. Spending on goods rebounded 1.1% after two straight monthly declines. Stocks on Wall Street were trading higher. The dollar edged up against a basket of currencies. U.S. Treasury prices were mixed.Strong demand was underscored by another report from the Commerce Department showing imports of goods climbed 1.8% in April, mostly reflecting motor vehicles and consumer goods. But the rising imports and a 5.5% drop in exports caused the goods trade deficit to widen 17.0% to $96.8 billion, a development that could subtract from growth this quarter.
Credit has also become more expensive following 500 basis points worth of rate increases from the Fed since March 2022, when it embarked on its fastest monetary policy tightening campaign since the 1980s to tame inflation. Excluding the volatile food and energy components, the PCE price index was up 0.4% after a 0.3% rise in March. The so-called core PCE price index jumped 4.7% on a year-on-year basis in April after gaining 4.6% in the 12 months through March. The Fed tracks the PCE price indexes for its 2% inflation target.
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