Energy spending rose in the first quarter amid the war in Ukraine, rising 33.9 percent in the year ended March. Food prices rose 9.2% over the same period.
Excluding food and energy costs, the PCE inflation rate rose by 5.2%, a slightly slower pace than the 5.3% recorded in February. This index is the preferred measure of inflation by the Federal Reserve, but a slight decline is unlikely to change the Fed’s policy.
The central bank began raising interest rates last month to cope with high inflation, and is expected to continue raising interest rates throughout the year. At the long-awaited policy meeting next week, the bank is expected to raise interest rates by half a percentage point.
Economists hope that inflation peaked in the first quarter, but only April data could show some relief.
In March alone, prices rose by 0.9%, more than in previous months, while base prices rose by 0.3%, unchanged from February and in line with economists’ expectations.
Americans are a little more optimistic
Despite the jump in prices in March, Americans are feeling a little better for the economy in April, according to data from a survey of consumer sentiment at the University of Michigan on Friday.
Much of the reason was the drop in gas price expectations: after pump prices jumped in March, they fell again in April, bringing some relief to household budgets.
“Other positive aspects of consumer spending in 2022 are the very strong labor market and the record high household wealth due to rising housing values and the still rising stock market, even with recent price declines,” said the chief economist. PNC Gus Foscher. “However, rising interest rates this year will be a bigger challenge, especially for items with big tickets.”
However, Friday’s figures should be taken with confidence: with the exception of February and March, the April sentiment index is still lower than at any time in the last decade.
“Consumers have lost confidence in economic policies, and fiscal action has been hampered by guerrilla warfare on the eve of the congressional election,” said Richard Curtin, chief economist at Surveys of Consumers. “Monetary policy now aims to mitigate the strong labor market and reduce wage growth, the only factors that now support optimism.”
For the time being, the labor market remains strong and employers continue to raise wages to retain and attract workers. BEA data on Friday showed that US revenue increased by 0.5% or 107.2 billion dollars. Disposable income also increased by 0.5%, or $ 89.7 billion, while consumer spending increased by 1.1%, or $ 185 billion, more than the previous month.
However, Americans saved less: the percentage of personal savings fell to 6.2%, the lowest level since 2013.
Data on employment costs released by the Bureau of Labor Statistics on Friday morning show that compensation has risen by 1.4% in the three months ended March, adjusted for seasonal fluctuations, more than expected.
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