Experts say a key inflation indicator rose faster than expected at 3.1% last month as price pressures built in the rapidly expanding U.S. economy. The core personal consumption expenditures index (PCE), which the Fed uses as the best gauge for inflation, was forecast to increase only 2.9%. Reports indicate personal income dropped sharply as the effects faded from March’s government stimulus checks.

 

CNBC/Jeff Cox
A key U.S. inflation gauge rose 3.1% year over year, higher than expected

A key inflation indicator rose 3.1% in April, faster than expected, as price pressures built in the rapidly expanding U.S. economy, the Commerce Department reported Friday.

The core personal consumption expenditures index was forecast to increase 2.9%. Federal Reserve officials consider the measure to be the best gauge for inflation, though they watch a number of metrics.

As part of its price stability mandate, the Fed considers 2% to be healthy, though it is committed to letting the level average higher than usual in the interest of promoting full employment.

The index captures price movements across a variety of goods and services and is generally considered a wider-ranging measure for inflation as it captures changes in consumer behavior and has a broader scope than the Labor Department’s Consumer Price Index. The CPI accelerated 4.2% in April.

Over the past month, core PCE rose 0.7 %, also quicker than the expected 0.6%.

Including volatile food and energy prices, the headline PCE index jumped 3.6% year over year and 0.6% from March.

That increase in inflation came with a sharp deceleration in personal income, which declined 13.1%. But that actually was less than the 14% estimate. Personal income had surged 20.9% in March following the latest round of government stimulus checks.

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Fox Business/Jonathan Garber
Personal income plunges as stimulus check boost fades, inflation runs hot

Personal income tumbled in April as the prior month’s boost from stimulus checks waned and inflation ran hotter than expected, Fox Business reports.

Personal income declined 13.1% month over month, less than the 14.1% decline that economists surveyed by Refinitiv were anticipating. Incomes surged by a downwardly revised record 20.9% in March as the government sent out $1,400 checks to most Americans.

Consumer spending, which accounts for two-thirds of U.S. economic activity, edged up 0.5%, in line with estimates. Spending was revised up to 4.7% last month, from the initial 4.2% print.

Meanwhile, core personal consumption expenditures, which exclude food and energy, rose 0.7% month over month and 3.1% from the prior year, both exceeding the respective 0.6% and 2.9% that analysts were expecting. The 3.1% increase was the biggest in at least 28 years and the 1.2 percentage point increase from March’s upwardly revised 1.9% year-over-year print was the largest since recordkeeping began in 1960.

 

Kitco News/Jim Wyckoff
More profit taking for gold, silver to end the trading month

Gold and silver prices are modestly lower in early morning U.S. trading Friday, on some profit-taking and book-squaring on this last trading day of the month of May. Don’t be surprised to see the bulls step in and buy these mild dips in gold and silver prices, as the technical postures for both metals remain bullish. June gold futures were last down $4.80 at $1,890.90 and July Comex silver was last down $0.335 at $27.59 an ounce.

The U.S. data point of the day Friday is the just-released report on April personal consumption (consumer spending). The report showed a rise of 0.5% in spending, which was right in line with the consensus forecast of up 0.5% from March. The April personal consumption/expenditures price index was up 0.6% from March and up 3.6% year-on-year. The precious metals markets are showing no significant reactions to the data.

Global stock markets were mostly firmer overnight. U.S. stock indexes are pointed toward higher openings when the New York day session begins. This week has seen the marketplace appear less concerned about problematic price inflation occurring in the coming months.

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