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Rising US Wages Support Spending in April as Inflation Slows: Govt

May 27, 2022
According to the Commerce Department report, U.S. personal income rose 0.4% compared to March.

American wages continued to rise in April, supporting an ongoing increase in consumption in the face of an inflation wave that nonetheless shows signs of waning, according to government data released Friday.

U.S. personal income rose 0.4% compared to March, while personal consumption expenditures (PCE) gained 0.9%, slowing from the gain in the prior month, according to the Commerce Department report.

But in a bit of good news for shoppers, the PCE price index slowed sharply, increasing just 0.2% after several months of accelerating at more than twice that pace and 0.9% in March.

The world's largest economy has been battered for months by a cresting inflation wave, made more painful by the surge in energy prices caused by the fallout from the Russian invasion of Ukraine.

Over the last 12 months, the key inflation measure slowed to 6.3% from 6.6% in the prior month, according to the data. 

Excluding volatile food and energy goods, the increase in the "core" PCE price index was a more modest 4.9%.

PCE is the Federal Reserve's preferred price gauge, and the central bank has launched a counter-offensive against inflation with a series of aggressive interest rate hikes to cool the economy.

The process began in March and was followed early this month by a half-point increase, the biggest since 2000.

Policymakers argue that the U.S. economy is strong enough to withstand the increased borrowing costs, and though the hot housing market has cooled, consumers show no signs of reducing spending.

The data show "consumers are resilient, for now," said Rubeela Farooqi of High Frequency Economics.

"With inflation still uncomfortably high, the labor market strong and household spending maintaining positive momentum, the Fed will stick with its plan" to raise rates by a half point at the next two meetings, she said.

Personal income increased $89.3 billion in April, while disposable personal income rose $48.3 billion and expenditures increased $152.3 billion, the report said.

Outlays on services were the biggest element, led by food services, but also hotels, housing and utilities.

The report said spending rose across all categories, except for gasoline, led by outlays on autos.

Copyright Agence France-Presse, 2022

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