Consumers spend at fastest pace in four months in a sign of spring economic rebound

Shoppers look into a store in Miami Beach, Fla., on April 26.
(Wilfredo Lee / Associated Press)

Americans ratcheted up their spending in April at the fastest pace in four months in a sign the economy has rebounded this spring after a lackluster winter.

The new data also could help push Federal Reserve officials to hike a key interest rate again when they meet in two weeks.

Personal consumption expenditures increased 0.4% in April, up from 0.3% the previous month, the Commerce Department said Tuesday.

Americans had more money to spend, with personal incomes also rising 0.4% — twice the pace of growth in March.


“Consumers are back out in force this quarter, spending their hearts away after taking the first quarter of the year off,” said Chris Rupkey, chief financial economist at Mitsubishi UFG Union Bank in New York.

“Fed officials can continue with their gradual pace of rate hikes as the economy remains on course for stronger growth this quarter and throughout the rest of the year,” he said.

Consumer spending, which accounts for about two-thirds of U.S. economic activity, increased just 0.6% from January through March. That was the worst performance since late 2009 and helped contribute to a lackluster 1.2% annual growth rate in the first quarter.

Fed monetary policymakers said after their May 2-3 meeting that they thought the economic weakness was “likely to be transitory.”


They indicated they were ready to enact another small increase in the benchmark short-term interest rate if economic data strengthened as they expected.

Economists are expecting overall growth to improve to about a 3% annual rate in the second quarter. April’s stronger consumer spending is a sign those forecasts are correct.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said Tuesday’s data showed that consumer spending is “on course for a solid rebound” in the second quarter.

Another key indicator will come on Friday, when the Labor Department is expected to report solid growth of about 185,000 net new jobs in May.


Tuesday’s Commerce Department report also showed that prices increased 0.2% in April after a decline of 0.2% the previous month. Core prices, which exclude volatile food and energy costs, also increased 0.2% in April.

For the 12 months ending April 30, overall prices increased 1.7% and core prices were up 1.5% Those figures were down from the annual rate through March 31.

Fed officials want core prices to rise 2% a year.

Twitter: @JimPuzzanghera



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