Americans increased their spending by 0.5 percent in April, a slowdown after a massive gain in March that had been powered by the distribution of billions of dollars in individual stimulus checks.
Even with the pullback from a 4.7 percent surge in spending in March, the April increase provided further evidence that consumers are driving a strengthening recovery from the pandemic recession.
Friday’s report from the Commerce Department also showed that personal incomes, which provide the fuel for spending, tumbled 13.1 percent in April. But the drop in income was expected, having followed a record 20.9 percent income gain in March that reflected the billions in one-time checks to most adults.
In addition, the report showed that inflation by a measure preferred by the Federal Reserve surged a bigger-than-expected 3.6 percent for the 12 months ending in April. Excluding volatile food and energy, the so-called core increase was a still high 3.1 percent. Both figures are far above the Fed’s 2 percent target for inflation.
The April gain in consumer spending, slight as it was, supported the view that the economy is rebounding rapidly as individuals and businesses grow increasingly confident enough to spend, hire, and invest. On Thursday, the government estimated that the economy grew at a robust 6.4 percent rate in the January-March quarter, powered in large part by consumer and business spending.
The economy is thought to be expanding even faster in the current April-June quarter. The outlook for the rest of the year is brightening, too, on the strength of trillions of dollars more in government support, increased mobility as vaccinations keep increasing and a surge in pent-up consumer demand. More Americans are venturing out to shop, travel, dine out, and gather in large groups at sporting and entertainment venues. For 2021 as a whole, many economists foresee growth, as measured by the gross domestic product, achieving its fastest pace since at least 1984.