- Personal consumption expenditures rose 0.5% in April from March
- The core PCE price index rose 3.1% in April compared to prior year
- Home prices rose 13.3% over the prior year in the 20 largest U.S. cities in March
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Personal Spending Withstands Income Drop: The Bureau of Economic Analysis (BEA) reported last week that personal consumption expenditures, a measure of consumer spending for all goods and services, rose by 0.5% in April from the prior month. With the economic reopening gaining steam in April, consumer spending on recreation services, food services, and accommodations saw large gains. While a deceleration from March pace of 4.7%, the growth in April came despite a decline in total personal income of 13.1% during the month, which reflected decreased fiscal support after the $1.9 trillion stimulus bull and $1,400 stimulus checks were delivered to most individuals in March.
Fed’s Preferred Inflation Index Jumps in April: The price index embedded within last week’s personal income and spending report from the BEA indicated that consumer prices rose 0.6% from March, or 3.6% over the prior year. The “core” PCE price index that strips out volatile food and energy prices, which is the Federal Reserve’s preferred inflation gauge, rose 0.7% from the previous month and 3.1% relative to April of 2020. This core annual rate was the highest registered since 1992 and brings the index well above the Federal Reserve’s inflation target of 2%, though the Fed has maintained that current elevated rates will prove transitory.
Home Sales Slow as Prices Remain Red Hot: U.S. home prices, as reflected in the S&P CoreLogic Case-Shiller Index that tracks residential real estate prices in the 20 largest U.S. cities, increased at an annual rate of 13.3% through March of this year. This was the tenth consecutive month of accelerating prices and the highest rate in more than seven years. All regions of the country saw double-digit gains, with the strongest growth seen in Phoenix (+20.0%) and San Diego (+19.1%). Surging prices and low inventories may be starting to impact the rate of housing activity, however, with recent reports indicating that existing and new home sales fell 2.7% and 5.9%, respectively, in April from the prior month.