Both American incomes and spending rose in April, demonstrating the resilience of the economy amid rising prices and warnings of a possible recession.
Private consumption rose 0.8% in April, the Commerce Department said on Friday. The increase followed two months of sluggish spending and beat forecasters’ expectations as Americans spent big on cars, restaurant meals, movie tickets and other goods and services.
After-tax income rose 0.4%, helped by a strong job market that continued to push up wages and welcome more people into the workforce. Labor Department data released earlier this month showed that the employment rate for Americans in their prime in April was the highest in more than 20 years.
Individual data Figures released by the Department of Commerce on Friday showed that a key indicator of business investment also rose in April, suggesting business executives do not expect a significant drop in demand in the coming months.
Consumer resilience does not bode well for Federal Reserve officials who worry that strong spending is contributing to inflation, but also do not want the economy to slow so sharply that it plunges into recession. is. The gradual slowdown in spending seen in recent months is broadly in line with the “soft landing” scenario policymakers are aiming for, but policymakers are wary of claiming victory too soon. This concern was raised by April’s figures, which showed sustained inflation along with higher spending. You can underline.
“The odds of a recession have dropped again,” Navy Federal Credit Union corporate economist Robert Frick said in a note to clients Friday. “One problem the report reveals is that inflation remains high and even though a moratorium was being considered, the Fed will continue to do so,” he said, referring to a meeting of policymakers scheduled for June. That could entice the Fed to raise the Fed Funds rate even further,” he added.
It is unclear how long consumers will be able to sustain the economic recovery. The savings that some households built during the pandemic are starting to dwindle, and there are signs that businesses are starting to backtrack on hiring. The dispute over the debt ceiling could further dampen the economy’s momentum, but there were signs Thursday night that Washington’s leaders were getting closer to a deal to avoid a default.
