American consumers are proving to be more resilient than many market experts had expected in the tough economic climate, and this strength in spending is fueling the reacceleration in inflation.
This might not, however, be good news for consumers or the Federal Reserve.
In April, the Fed’s preferred inflation gauge—the Personal Consumption Expenditures (PCE) price index—unexpectedly rose in April, climbing to 4.4 percent, according to the Bureau of Economic Analysis (BEA). The core PCE, which excludes the volatile energy and food components, also edged up to 4.7 percent.
The PCE report revealed consumers are surviving amid an environment of high prices, rising borrowing costs, and a slowing economy. While real household income (inflation-adjusted) was flat, consumer spending advanced at a significant 0.8 percent in April, fueling the jump in prices….