May 31, 2024 - Business

Fed's go-to inflation gauge cooled in April as shoppers slowed spending

Courtenay Brown

shopper with bag — A shopper carries a bag past a storefront in Washington, DC. Photo: Al Drago/Bloomberg via Getty Images

The Federal Reserve's go-to inflation gauge ticked down in April as consumers pulled back on spending, the Commerce Department said Friday.

Why it matters: The data is welcome news after a months-long stretch where inflation by this measure hadn't budged. Even so, prices across a slew of goods and services are still rising too quickly for the central bank's comfort.

By the numbers: The Personal Consumption Expenditures Price Index rose 0.3% in April, matching the prior month's pace.

But the "core" gauge that strips out food and energy — considered a better measure of underlying inflation and closely watched by the Fed — rose 0.2%, the slowest pace since the end of last year.
The overall index's year-on-year rate held at 2.7%, while the core measure held at 2.8%.

Zoom in: The data also showed American shoppers slowed spending last month.

Personal consumption expenditures rose 0.2%, a sharp drop from the 0.7% in March. Spending on services like housing and health care jumped, but was offset by less spending on goods.
Accounting for inflation, expenditures fell 0.1%, compared to the 0.4% increase the prior month.

That came as consumers' disposable personal income similarly cooled.

It increased by 0.2% last month — a smaller increase than the 0.5% seen in March.
In real terms — that is, adjusted for inflation — disposable personal income fell by 0.1% compared to a gain of a similar amount the prior month.

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Fed's go-to inflation gauge cooled in April as shoppers slowed spending

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