Inflation growth as measured by the Fed was slightly lower than anticipated in April.
Figures from the Commerce Department’s Bureau of Economic Analysis show that the personal consumption expenditure price index (PCE) rose by 0.4% last month compared to March, whereas economists had predicted a rise of 0.5%.
In March, the index had increased by 0.7%. Year-over-year, PCE prices have gone up by 3.8%. The Federal Reserve aims for a 2% annual rise in PCE prices.
When excluding the more volatile food and energy sectors, core PCE inflation saw a 0.2% rise in April, marking a 3.3% increase over the last year. This outcome was slightly below economists’ expectations of a 0.3% increase, which would have matched March’s rate.
Commodity prices moved up by 0.7%, which is half of the 1.4% increase reported in March. Year-over-year, commodity prices are up by 4.3%. Prices for durable goods climbed by 0.6% in April, while recreational goods saw a larger jump of 1.6%. Conversely, prices for automobiles, home furnishings, and electronics decreased. Durable goods prices rose 3.2% from last year.
Non-durable goods prices increased by 0.8%, largely due to a 5.5% surge in gasoline and energy prices, bringing the year-over-year increase to 4.9%. In April, gasoline and energy prices spiked by 28.9% compared to the same month last year, following a 20.9% rise in March. Clothing and footwear prices have risen significantly for five straight months, now sitting 3.7% higher than last year. Food and beverage prices inched up by 0.5% after a slight decline of 0.1% in March, adding up to a 2.6% increase over the year.
Service prices experienced a 0.3% increase for the third consecutive month, with the annual rise at 3.6%. Housing prices increased by 0.5%, which is a 3.3% rise year-on-year, marking the most substantial increase in a year. Medical costs saw only a slight increase of 0.1% in April, with a 2.9% rise over the year.
The Personal Consumption Expenditures Price Index generally aligns with the Consumer Price Index produced by the Department of Labor, which is a widely recognized measure of inflation in the U.S. It assesses prices across a range of goods and services that businesses and charities purchase for consumers, while adjusting more readily as consumer buying patterns evolve.
Consumer spending grew by 0.5% compared to the previous month, primarily driven by rising prices. When adjusted for inflation, personal consumption saw a minimal increase of just 0.1%. Spending on core goods, after inflation adjustment, actually dipped by 0.2%, whereas expenditures on services rose by 0.3%.
Personal income remained unchanged for the month, with disposable income and after-tax income experiencing a decrease of 0.1%. Adjusted for inflation, disposable income fell by 0.5%, largely due to a drop in farm income. The Bureau of Economic Analysis noted that this decline was influenced by reduced payments from the Farmer Bridge Assistance Program, designed to stabilize farm income during the transition to new provisions established by the One Big Beautiful Bill Act.
Total wages and salaries showed a modest increase of 0.24% in April, which is a rise of 3.53% compared to a year ago, but this lagged behind broader price growth. Private sector wages and salaries increased by 0.25%, matching headline PCE inflation, with a year-over-year increase of 3.86%.
