US consumer spending growth slows while inflation remains soft
[WASHINGTON] US consumers hit the brakes in April after the strongest month of spending since early 2023 while inflation remained tame, consistent with a slowing economy.
Inflation-adjusted personal spending rose 0.1 per cent after rising 0.7 per cent a month earlier, Bureau of Economic Analysis data showed Friday.
The personal consumption expenditures price index, excluding food and energy, increased 0.1 per cent from a month earlier. Compared with a year earlier, the so-called core inflation gauge rose 2.5 per cent from April 2024 – the smallest annual advance in more than four years.
The figures illustrate an undercurrent of anxiety among many American consumers about the economy after the weakest quarter for spending in nearly two years. While higher duties on imports have yet to show up more broadly in higher goods prices, sentiment has slumped and the outlook for personal finances stands at a record low.
The modest rise in spending reflected an increase in services that more than offset a decline in durable goods outlays.
At the same time, the Trump administration has walked back or paused some tariffs as negotiators work toward trade deals with key partners including China and the European Union. On Wednesday, a US court issued a ruling that blocks many of the import taxes.
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Separate data out Friday showed a massive narrowing of the US merchandise-trade deficit in April on the largest-ever decrease in imports.
The constant state of flux in trade policy has nonetheless fuelled uncertainty, with consumers’ spending attitudes hanging in the balance. Meanwhile, Federal Reserve policymakers will likely keep interest rates unchanged for the foreseeable future until they get more clarity on the impact of tariffs not only on prices but also on other pillars of the economy like the labour market and consumer spending.
Economists are paying close attention to the degree to which companies are passing through higher import duties to consumers. A measure of goods inflation that excludes food and energy climbed 0.3 per cent.
While many companies have so far been absorbing or offsetting much of the hit from tariffs, retailers including Walmart and Macy’s Inc have indicated Americans will start seeing price hikes soon. BLOOMBERG
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