Fed's go-to inflation gauge slows in April, alongside drop in consumer spending

By the numbers: The Personal Consumption Expenditures Price Index — closely tracked by the Fed — increased 2.1% last month, compared to the 2.3% increase in March.

• The core measure, which excludes food and energy, increased 2.5% from a year ago, compared to the 2.6% gain in March.

State of play: It is the latest major inflation report to signal good news on consumer prices — at least for now. The Consumer Price Index, released earlier this month, increased at the slowest annual pace in four years in April.

Yes, but: The data does not yet reflect the price pressures that businesses have reported in various surveys, largely because retailers are rolling through inventory stockpiled before the tariffs took effect.

• The trade outlook has shifted plenty since April. Taxes on Chinese imports fell to 30% in May from the 145% that prevailed for much of the previous month.
• As of this week, much of Trump's trade agenda is in legal limbo.

Between the lines: Data released alongside the inflation data showed early warning signs about the American consumer.

• Personal consumption expenditures — a measure of consumer spending — rose just 0.2%, a cooldown from the 0.7% increase in March.
• That is despite a sharp jump in disposable income, which rose 0.8% last month, up from the 0.5% increase in March.
• The Commerce Department said that jump largely reflected increases in government social benefits, including Social Security.