Eliminating the cost of food and energy, the measure of PCE inflation increased by 5.2%, at a slightly slower pace than the 5.3% recorded in February. This index is the Federal Reserve’s preferred measure of inflation, but a slightly lower one is unlikely to change the Fed’s policy course. The central bank began raising interest rates last month to deal with high inflation and is expected to continue raising interest rates year-round. At next week’s long-awaited policy meeting, the bank is expected to raise interest rates by half a percentage point. Economists hope that inflation peaked in the first quarter – but only the April figures could show some relief. Looking only at March, prices rose 0.9%, more than in previous months, while core prices rose 0.3%, steadily since February and in line with economists’ expectations.
Americans feel a little more optimistic
Despite price jumps in March, Americans felt a little better about the economy in April, according to data from the University of Michigan Consumer Survey on Friday. A big part of the reason was the fall in gas cost expectations: After pump prices soared in March, they eased again in April, bringing some relief to household budgets. “Other positives for consumer spending in 2022 are the very strong labor market and the high wealth of households, due to the increase in the value of housing and the rising value of the stock market, even with recent price reductions,” said the chief economist. PNC, Gus Fotser. “However, the rise in interest rates this year will be more difficult, especially for large tickets.” That said, Friday’s data must be taken seriously: with the exception of February and March, the climate index for April was even lower than anywhere else in the past decade. “Consumers have lost confidence in economic policies, with fiscal action increasingly hampering partisanship in the run-up to the congressional election,” said Richard Curtin, chief economist at Surveys of Consumers. “Monetary policy is now aimed at mitigating a strong labor market and reducing wage earnings, the only factors that now support optimism.” At present, the labor market remains strong and employers continue to raise wages to retain and attract employees. Friday’s BEA data showed U.S. revenue rose 0.5 percent, or $ 107.2 billion. Disposable revenue also rose 0.5 percent, or $ 89.7 billion, while consumer spending rose 1.1 percent, or $ 185 billion, more than the previous month. However, Americans saved less: The personal savings rate fell to 6.2%, the lowest level since 2013. Data on employment costs released by the Bureau of Labor Statistics on Friday morning showed that earnings rose 1.4% in the quarter ended March, adjusted for seasonal fluctuations, more than expected.
