U.S. Consumer Spending Jumped in April and Inflation Accelerated

By Harriet Torry

Consumers increased their spending sharply last month and inflation accelerated as the Federal Reserve debates whether to raise interest rates in June and as negotiators race to meet a debt-ceiling deadline.

Consumer spending, the primary driver of economic growth, rose 0.8% in April, the Commerce Department said Friday, boosted by higher spending on vehicles and services such as insurance and healthcare. April's report came after two months of weaker spending, with March and February both up 0.1%, the report said.

Adjusted for inflation, consumer spending rose 0.5% last month.

The Fed's preferred gauge of consumer inflation, the personal-consumption expenditures price index, rose 0.4% in April from the prior month and 4.4% from a year earlier. When excluding volatile food and energy costs, prices rose 0.4% in April from the prior month and 4.7% from a year earlier. Economists see so-called core inflation as a better predictor of future inflation.

Over the past six months, senior Fed officials have focused on prices for a subset of labor-intensive services by excluding food, energy, shelter and goods. Officials believe that category could reveal whether wage pressures from the solid labor market are passing through to consumer prices. That reading rose 0.4% in April from the prior month and increased 4.6% from a year earlier, according to Wall Street Journal calculations.

The Fed's inflation target is 2%.

Write to Harriet Torry at harriet.torry@wsj.com

(END) Dow Jones Newswires

May 26, 2023 09:08 ET (13:08 GMT)

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