U.S. Consumer Spending Signals Second-Quarter Rebound On Track

(Bloomberg) -- The consumer is on track for a second-quarter comeback after a weak stretch at the start of the year, as Americans kept up spending in line with income gains in April, Commerce Department figures showed Tuesday.

Key Takeaways

The pickup in nominal consumer purchases shows Americans appear more eager to spend in the second quarter following the weakest gains since 2009 in the January-March period. Household balance sheets that have been strengthening with a tightening labor market and rising wages should help buoy spending as the broader economy gains momentum. Wages and salaries rose 0.7 percent from the previous month, matching the fastest gain since April 2016.

While Federal Reserve policy makers should take some comfort that the results were in line with forecasts and core prices exceeded estimates, their preferred inflation gauge did slow down on a year-over-year basis, slipping slightly further away from the 2 percent annual target. The central bank is expected to raise interest rates at its June meeting, though a sustained slowdown in inflation could delay another hike this year.

Other Details

• Saving rate unchanged at 5.3 percent in April
• Adjusted for inflation, purchases increased 0.2 percent last month after a revised 0.5 percent gain in March
• Household outlays on services unchanged from previous month after adjusting for inflation; rose 0.6 percent in March
• Spending on goods rose 0.7 percent after adjusting for inflation, up from 0.3 percent gain in March
• Disposable income rose 0.2 percent in April after adjusting for inflation

To contact the reporter on this story: Patricia Laya in Washington at playa2@bloomberg.net.

To contact the editor responsible for this story: Scott Lanman at slanman@bloomberg.net.