Inflation, high interest rates, and the depletion of excess household savings may finally be starting to take a toll on the economy.
Commerce Department data released on Friday showed consumer spending rose 0.2% in April, the smallest increase in three months. Economists had expected a 0.4% increase.
The slowdown in the main driver of U.S. economic growth, which accounts for about 70% of the U.S. economy, could weigh on second-quarter GDP. Consumer spending rose just 2% in the first quarter, down from more than 3% in the two previous quarters. On Thursday, that figure was revised down from a previous forecast of 2.5% growth.
Some analysts have suggested that an early Easter holiday may have led to lower spending in April and higher spending in March. Consumer spending rose 0.7% in March. Combining those two months of spending makes it look healthier.
Still, April’s modest gains will likely prompt Wall Street to cut its second-quarter GDP forecast. The Atlanta Fed’s GDPNow model projects the economy growing 2.7% from April through June, down from 3.5% earlier this week.
