WASHINGTON (Reuters) - U.S. consumer spending increased more than expected in April, a further sign that economic growth was regaining momentum early in the second quarter, while inflation continued to rise steadily.
Other data on Thursday showed a bigger-than-expected drop in the number of Americans filing applications for unemployment benefits last week. Moderately rising inflation and a tightening labor market bolster expectations that the Federal Reserve will raise interest rates next month.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, jumped 0.6 percent last month, the biggest gain in five months, the Commerce Department said. That followed a 0.5 percent increase in March.
Economists polled by Reuters had forecast consumer spending advancing 0.4 percent. Spending was boosted by purchases of gasoline and other energy products. Nondurable goods purchases increased 0.9 percent. There were also increases in purchases of long-lasting goods. Outlays on services rose 0.5 percent, lifted by demand for household utilities.
Prices continued to gradually rise last month. The personal consumption expenditures (PCE) price index excluding the volatile food and energy components increased 0.2 percent for the third straight month.
That left the year-on-year increase in the so-called core PCE price index at 1.8 percent. The core PCE index is the Fed’s preferred inflation measure. The U.S. central bank has a 2 percent inflation target.
Economists expect the annual core PCE price index will breach the Fed’s target in the coming months. The Fed increased borrowing costs in March and has
