The ongoing willingness of the nation’s consumers to keep spending freely despite inflated prices is helping sustain the economy.
- An inflation gauge closely tracked by the Federal Reserve rose 6.3% in April from a year earlier, the first slowdown since November 2020 and a sign that high prices may finally be moderating, at least for now. was below the four-decade high of 6.6% set in March. While high inflation is still causing hardships for millions of households, any slowing of price increases, if sustained, would provide some modest relief.
Consumers’ resilience in the face of sharply higher prices suggests that economic growth is rebounding in the current April-June quarter. The economy shrank at a Friday’s report showed that on a month-to-month basis, prices rose 0.2% from March to April, down from the 0.9% increase from February to March. The April increase was the smallest since November 2020.Excluding the volatile food and energy categories, so-called core prices rose 0.3% from March to April, matching the previous month’s rise. Core prices climbed 4.9% from a year earlier, the first such drop since October 2020.
Goods prices, which were the major drivers of inflation last year, fell 0.2% from March to April after having jumped the previous month. Used car prices dropped 2.3% in April, though they’re still much more expensive than a year ago. The cost of clothing, appliances, and computers also declined. of televisions, patio furniture and other goods for the home as consumers have shifted their spending more toward travel and services-related goods like luggage and restaurant gift cards.
Chair Jerome Powell has pledged to keep ratcheting up the Fed’s key short-term interest rate until inflation is “coming down in a clear and convincing way.” Those rate hikes have spurred fears that the Fed, in its drive to slow borrowing and spending, may push . That concern has caused sharp drops in stock prices in the past two months, though markets have rallied this week.
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