Inflation, high interest rates, and the exhaustion of excess household savings may finally be taking their toll on the economy.
Consumer spending rose a modest 0.2 percent in April, the smallest increase in three months, data from the Department of Commerce showed Friday. Economists had expected a 0.4 percent rise.
As the main driver of U.S. growth, accounting for about 70 percent of the economy, this slowdown could weigh on second-quarter GDP. The first quarter saw a mild 2 percent increase in consumer spending, down from over 3 percent in the previous two quarters. On Thursday, this figure was revised down from the earlier estimate of a 2.5 percent rate of growth.
Some analysts suggest that an early Easter might have boosted March spending at April’s expense. In March, consumer spending jumped by 0.7 percent. Combined, spending in these two months appears healthier.
Nevertheless, the modest April increase is likely to prompt Wall Street to lower GDP forecasts for the second quarter. The Atlanta Fed’s GDPNow model now sees the economy growing at a 2.7 percent rate in the April through June period, down from 3.5 percent earlier this week.
