Americans’ income and spending both rose in April, a sign of an economic slowdown amid rising inflation and warnings of a possible recession.
Consumer spending rose 0.8 percent in April, the Commerce Department said Friday. Spending beat forecasters’ expectations for a two-month slowdown as Americans splurged on cars, restaurant meals, movie tickets and other goods and services.
After-tax income rose 0.4 percent, boosted by a strong job market that continues to push up wages and put more people to work. Labor Department data this month showed Americans in their prime working years were employed at the highest rate in more than two decades in April.
Separate data A key measure of business investment released by the Commerce Department on Friday showed that it rose in April, a sign that corporate executives do not expect a major decline in demand in the coming months.
Consumer resilience is a mixed blessing for Federal Reserve officials, who worry that strong spending is contributing to inflation, but who don’t want the economy to slow so fast that it falls into recession. The gradual slowdown in spending seen in recent months is broadly consistent with the „soft landing” scenario that policymakers are aiming for, but they are wary of declaring victory too soon — data for April showed steady inflation with strong spending. can be underlined.
„The odds of a recession have eased again,” Robert Frick, corporate economist at Navy Federal Credit Union, wrote in a note to clients on Friday. „One problem with the report is that inflation remains stubbornly high, and while a pause is on the table, it could prompt the Fed to raise the federal funds rate even more,” he said, referring to an upcoming meeting of policymakers in June.
It is unclear how long consumers can continue to prop up the economic recovery. The pandemic has started to drain the savings some households have built up, and there are signs that companies are starting to pull back on hiring. A standoff over the debt ceiling could slow the economy further, despite signs Thursday evening that leaders in Washington may be reaching a deal to avoid default.