PCE Report: Fed's Preferred Inflation Gauge Rises 3.8% In April, Q1 GDP Revised Downward To 1.6%

• Consumer spending, adjusted for inflation, increased 0.1% in April after rising 1.6% in March, while personal income decreased 0.1% during the month.
• In absolute terms, personal income decreased by less than $0.1 billion in April, while disposable personal income fell by $19.9 billion.
• Personal consumption expenditures increased $111.1 billion, while personal outlays increased $114 billion during the month.

The Personal Consumption Expenditures (PCE) Index, which is the Federal Reserve’s preferred gauge of inflation, advanced 3.8% in April on an annualized basis.

The Commerce Department data showed that core PCE, which excludes food and energy, rose 3.3% on an annualized basis in April, up 0.2% on a monthly basis.

Both PCE and core PCE were in line with analyst forecasts, according to a Dow Jones estimate as cited by MarketWatch.

PCE is now at its highest level since August 2023, while core PCE is at its highest level since November 2023.

Source: Bureau of Economic Analysis, U.S. Department of Commerce

Q1 GDP Revised Downward

The Bureau of Economic Analysis revised the first quarter (Q1) GDP downward to 1.6%, from its previous estimate of 2%, falling short of Wall Street’s expectations of 2% growth.

This is the second consecutive quarter of GDP growth miss. BEA data showed that the U.S. economy grew at an annualized rate of 0.5% in the fourth quarter (Q4), compared to a Dow Jones forecast of 0.7%.

Consumer Spending Inches Up

Consumer spending, adjusted for inflation, increased 0.1% in April after rising 1.6% in March, while personal income decreased 0.1% during the month.

In absolute terms, personal income decreased by less than $0.1 billion in April, while disposable personal income fell by $19.9 billion. Personal consumption expenditures increased $111.1 billion, while personal outlays increased $114 billion during the month.

Personal savings stood at $611.7 billion in April, while the personal saving rate was 2.6%.

Jobless Claims Rise Again

Meanwhile, jobless claims rose in the week ending May 23 to 215,000 from 210,000 in the prior week, higher than a Dow Jones estimate of 213,000, as cited by MarketWatch.

The four-week moving average for jobless claims, which smooths weekly volatility, rose to 6,250 to 209,000.

Continuing claims, which refer to the number of people claiming unemployment benefits beyond the first week, hovered in the 1.79 million range for the week ending May 16, increasing by 15,000 over the previous week’s revised level.

Meanwhile, U.S. equities declined in Thursday’s pre-market trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, fell 0.01%; the Invesco QQQ Trust ETF (QQQ) edged lower by 0.02%; and the SPDR Dow Jones Industrial Average ETF Trust (DIA) declined 0.15%. Retail sentiment on Stocktwits regarding the S&P 500 ETF was in the ‘bullish’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was up 0.12% at the time of writing.

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