WASHINGTON (Reuters) - U.S. consumer spending posted its biggest gain in five months 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 bolstered expectations that the Federal Reserve will raise interest rates next month.
“Consumer spending is accelerating and inflation is holding firm in a tightening labor market, so the Fed is likely to stay on course with those gradual rate hikes this year despite the signs of uncertainty elsewhere in the world from populism and trade protectionism,” said Chris Rupkey, chief economist at MUFG in New York.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, jumped 0.6 percent last month, the Commerce Department said. That was the largest rise since November and followed a 0.5 percent increase in March.
Economists polled by Reuters had forecast consumer spending advancing 0.4 percent. Spending was boosted by higher prices for gasoline and other energy products. Nondurable goods purchases surged 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
