According to new numbers from the Commerce Department, annual inflation slowed for the first time since November 2020 and continued to be outpaced by consumer spending. Friday’s numbers appear to be the strongest sign yet that inflation may have peaked.
“The [personal consumption expenditures (PCE)] price index for April increased 6.3% from one year ago, reflecting increases in both goods and services,” the Commerce Department reported. “Energy prices increased 30.4% while food prices increased 10.0%.”
The 6.3% inflation figure is down from 6.6% in March.
Friday’s numbers also showed that on a month-to-month basis, prices rose 0.2% from March to April. That’s down from the 0.9% increase from February to March, and it’s also the smallest since November 2020.
The 0.2% number was also dwarfed by the 0.9% increase in consumer spending. April marked the fourth straight month of consumer spending increases beating inflation.
“The $152.3 billion increase in current-dollar PCE in April reflected an increase of $48.6 billion in spending for goods and a $103.7 billion increase in spending for services,” the Commerce Department said. “Within goods, increases were widespread across all components except for gasoline and other energy goods; spending for motor vehicles and parts was the leading contributor to the increase. Within services, increases were also
widespread across all components, led by food services and accommodations as well as housing and utilities.”
The encouraging inflation and consumer spending numbers helped fuel a rally on Wall Street Friday morning. All of the 11 major S&P sectors advanced in morning trade, with technology and consumer discretionary sectors up 2.2% each at one point.
“If the consumer is able to keep spending and the prior number was revised up, that’s good news,” Robert Pavlik, senior portfolio manager at Dakota Wealth, said. “Right now it’s just a rally in a bear market … the market has just got extremely oversold and people are looking for bargains.”
Friday’s rally could serve as the exclamation mark to what has been a bounce-back week for Wall Street. The S&P 500, Dow Jones Industrial Average, and Nasdaq have risen more than 5% each so far this the week, putting them on course for their best weekly gain since mid-March.