As their wages rose last month, Americans channeled more dollars towards services even as prices continued ticking higher, government data released Friday said.
The Commerce Department reported personal consumption expenditures (PCE) climbed 1.1 percent in March, almost twice what analysts expected, while incomes saw a forecast-beating 0.5 percent increase, both signs of continued resilience in the economy.
The data also confirmed the potency of the continued inflation wave hitting the world’s largest economy, as prices rose 0.9 percent in the month, much more than the increase seen in February.
Compared to a year ago, they were up 6.6 percent, with energy prices shooting up 33.9 percent after Russia invaded Ukraine in February. Food prices jumped 9.2 percent.
PCE is the Federal Reserve’s prefered price gauge and the strong demand coupled with high inflation will likely bolster the case for the central bank to raise rates by a half-percentage point when they meet next week, with more hikes to come in future months.
Most of March’s spending went to services, which grew $114.6 billion, as consumers paid for international travel, accommodation and food services, among a wide range of business, the report said.
Goods outlays rose $70.4 billion, according to the data, as Americans spent more for gasoline but cut spending on durable goods, such as motor vehicles and parts, where prices have risen dramatically amid a global shortage of semiconductors.
Income rose due to a combination of increases in wages, farm revenues caused by higher food prices and a rise in interest payments.
While prices accelerated overall last month, “core” prices, which exclude volatile food and energy costs, showed signs of easing.
They were 5.2 percent higher compared to March 2021, slightly less than the annual increase seen in February. On a month-to-month basis, they rose 0.3 percent, the same as the month prior.
