US consumers boosted spending in April as inflation surged

[Omaha Steve]

Source: AP

By MARTIN CRUTSINGER

WASHINGTON (AP) — Americans increased their spending by 0.5% in April, a slowdown after a massive gain in March that had been powered by the distribution of billions of dollars in individual stimulus checks.

Even with the pullback from a 4.7% surge in spending in March, the April increase provided further evidence that consumers are driving a strengthening recovery from the pandemic recession. The April gain was led by a 1.1% rise in spending on services, the sector that covers airline travel, hotels and restaurants — areas that were devastated by the pandemic-caused shutdowns a year ago.

Friday’s report also showed that inflation by a measure preferred by the Federal Reserve surged by a bigger-than-expected 3.6% for the 12 months that ended in April. Even excluding the volatile food and energy categories, the so-called core inflation over that period was a still high 3.1%.

Both figures are far above the Fed’s 2% annual inflation target. Yet the current year-over-year inflation figures are likely temporarily elevated. That’s because when the pandemic paralyzed the economy in early spring last year, many prices plummeted before rebounding later in the year. That factor at least partly explains why the 12-month inflation figures look so large. They are expected to ease in the coming months, although inflation pressures have been surfacing in the prices of many goods and components — a result, in most cases, of supply shortages.



A customer walks behind a sign at a Nordstrom store seeking employees, Friday, May 21, 2021, in Coral Gables, Fla. The number of Americans seeking unemployment benefits dropped last week to 406,000, a new pandemic low and more evidence that the job market is strengthening as the virus wanes and economy further reopens. (AP Photo/Marta Lavandier)


Read more: https://apnews.com/article/health-coronavirus-pandemic-business-369e04df9484ef2477bfe42f9f3ffaab

[progree]

1. Headlines say April CPI is up 4.2% vs. year ago, but is up 2.6% vs. 14 months ago, annualized

(The CPI is different than the inflation measure that the OP mentions, called the PCE, but anyway this shows that the CPI, which is very high when comparing April 2021 to April 2020, is only 2.6% (annualized) when comparing April 2021 to February 2020. The CPI numbers are seasonally adjusted).

Monthly CPI changes (percentage points) -- the CPI peaked in February 2020, then fell a percentage point during the next 2 months, so yes, April 2020 is a depressed base to compare with

https://data.bls.gov/timeseries/CUSR0000SA0&output_view=pct_1mth
2020: 0.2 0.1 -0.3 -0.7 -0.1 0.5 0.5 0.4 0.2 0.1 0.2 0.2
2021: 0.3 0.4 0.6 0.8

Actual CPI index numbers, monthly
https://data.bls.gov/timeseries/CUSR0000SA0
2020: 258.687 258.824 257.989 256.192 255.942 257.282 258.604 259.511 260.149 260.462 260.927 261.560
2021: 262.231 263.161 264.793 266.832

April'21 over April'20 = 266.832 / 256.192 => +4.15% (12 months)
April'21 over Feb '20 = 266.832 / 258.824 => +3.09% (14 months)
Annualizing the 3.09%: 3.09% * 12/14 = 2.65%

[progree]

3. And comparing April 2021 CPI to April 2019, its just a 2.2%/year annualized increase

(again, the CPI measure is different than the measure referred to in the OP)

https://data.bls.gov/timeseries/CUSR0000SA0
April 2019 255.326
> +0.34%
April 2020 256.192
> +4.15%
April 2021 266.832

April 2021 / April 2019: +4.51%
Annualized: 4.51%/2 = 2.25%
(or 2.23% if do it the fancy math way that considers compounding:

( (266.832/255.326 )^(1/2) - 1 )*100% = 2.23%

[mahatmakanejeeves]

4. Let me see. Ah, that report was released back on May 12.

Wed May 12, 2021: BLS Report: CPI for all items rises 0.8% in April; used cars and trucks among many indexes rising

Wed May 12, 2021: Consumer prices spiked in April, growing at fastest pace in more than 12 years

[progree]

5. Yup! thanks /nt

[mahatmakanejeeves]

2. Adding a link:

This is at an annual rate, not just in one month.

Economy

Prices up 3.6 percent annually in April, reflecting upward trend, but policymakers say it’s temporary

The latest inflation data is unlikely to rattle the Federal Reserve, which says it will only raise interest rates once the labor market recovers.

By Rachel Siegel and Andrew Van Dam
May 28, 2021 at 11:48 a.m. EDT

Prices were up by 3.6 percent in April compared to a year ago, continuing a trend of rising inflation, although economic policymakers say the increases aren’t here to stay. ... Data released by the Bureau of Economic Analysis on Friday showed that prices rose 0.6 percent in the past month. However, consumer spending fell 0.1 percent in April compared to March, after adjusting for inflation, as stimulus running through the economy began to slow down.

The latest inflation data is unlikely to rattle the Federal Reserve, which is charged with keeping prices stable and unemployment low. Fed leaders have argued for months that a rise in inflation will be temporary, and that prices will simmer down as the economy reemerges from the pandemic. Rather than rush to raise interest rates and slow down the recovery, the Fed is urging patience so that the labor market has time to recover.

In April Americans’ after-tax income slid 15.1 percent from the record level it hit in March, when hundreds of billions of dollars in stimulus payments goosed U.S. bank accounts, after adjusting for inflation. In March, income had jumped an eye-popping 22.7 percent compared to February. So while after-tax income slipped in April, it has trended upward in the longer run, as stimulus checks and unemployment benefits continued to arrive in April but at lower levels.

{snip}

Former treasury secretary Larry Summers, an early critic of the administration’s stimulus plan, also doubled down on his inflation concerns this week. In a Washington Post op-ed, Summers wrote that “the primary risk to the U.S. economy is overheating — and inflation.”

By Rachel Siegel
Rachel Siegel is an economics reporter covering the Federal Reserve. She previously covered breaking news for the Post's financial section and local politics for the Post's Metro desk. Before joining the Post in June 2017, Rachel contributed to The Marshall Project and The Dallas Morning News. Twitter https://twitter.com/rachsieg

By Andrew Van Dam
Andrew Van Dam covers data and economics. He previously worked for the Wall Street Journal, the Boston Globe and the Idaho Press-Tribune. Twitter https://twitter.com/andrewvandam

[mahatmakanejeeves]

6. From the source:

"Energy prices increased 24.8 percent...."

News Release

EMBARGOED UNTIL RELEASE AT 8:30 A.M. EDT, Friday, May 28, 2021

BEA 21-23

Personal Income and Outlays, April 2021

Personal income decreased $3.21 trillion (13.1 percent) in April according to estimates released today by the Bureau of Economic Analysis (tables 3 and 5). Disposable personal income (DPI) decreased $3.22 trillion (14.6 percent) and personal consumption expenditures (PCE) increased $80.3 billion (0.5 percent).

Real DPI decreased 15.1 percent in April and Real PCE decreased 0.1 percent; goods decreased 1.3 percent and services increased 0.6 percent (tables 5 and 7). The PCE price index increased 0.6 percent. Excluding food and energy, the PCE price index increased 0.7 percent (table 9).

{snip}

The decrease in personal income in April primarily reflected a decrease in government social benefits (table 3). Within government social benefits, "other" social benefits decreased as economic impact payments made to individuals from the American Rescue Plan Act of 2021 continued, but at a lower level than in March. Unemployment insurance also decreased, led by decreases in payments from the Pandemic Unemployment Compensation program.

The $80.3 billion increase in current dollar PCE in April reflected an increase of $112.6 billion in spending for services that was partly offset by a $32.3 billion decrease in spending for goods (table 3). Within services, the largest contributors to the increase were spending for recreation services and for food services and accommodations. Within goods, a decrease in nondurable goods was partly offset by an increase in durable goods. Within nondurable goods, the decrease was widespread and led by food and beverages. Within durable goods, the increase was accounted for by an increase in motor vehicles and parts. Detailed information on monthly real PCE spending can be found on Table 2.3.5U.

Personal outlays increased $82.8 billion in April (table 3). Personal saving was $2.81 trillion in April and the personal saving rate—personal saving as a percentage of disposable personal income—was 14.9 percent (table 1).

The PCE price index increased 3.6 percent in April from one year ago, reflecting increases in both goods and services (table 11). Energy prices increased 24.8 percent while food prices increased 0.9 percent. Excluding food and energy, the PCE price index increased 3.1 percent in April from one year ago.

{snip}

Updates to Personal Income and Outlays

Estimates have been updated for October through March. For October through December, estimates for compensation, personal taxes, and contributions for government social insurance reflect the incorporation of the most recently available fourth-quarter wage and salary data from the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages program. Revised and previously published changes from the preceding month for current-dollar personal income, and for current-dollar and chained (2012) dollar DPI and PCE, are shown below.

{snip}

* * *

Next release: June 25, 2021 at 8:30 A.M. EDT
Personal Income and Outlays, May 2021

[The Mouth]

7. I'm more worried about inflation than about Q-anon idiots or China

Inflation is a KILLER for anyone on a fixed income; pensions, SSI, none of these ever keep up.

I remember the 70's. Inflation is what gave us Reagan instead of Carter's second term.

We need to get this under control, and in a time frame measured in weeks, not months or 2022 is going to be a bloodbath.