Key inflation gauge slows for first time since Nov. ’20

An inflation gauge closely tracked by the Federal Reserve rose 6.3% in April from a year earlier, the first slowdown since November 2020 and a sign that high prices may finally be moderating, at least for now.

The inflation figure the Commerce Department reported Friday was below the four-decade high of 6.6% set in March. While high inflation is still causing hardships for millions of households, any slowing of price increases, if sustained, would provide some modest relief.

The report also showed that consumer spending rose at a healthy 0.9% annual rate from March to April, outpacing the month-to-month inflation rate for a fourth straight time. The ongoing willingness of the nation’s consumers to keep spending freely despite inflated prices is helping sustain the economy. Yet all that spending is helping keep prices high and could make the Federal Reserve’s goal of taming inflation even harder.

“Inflation is finally slowing, but it’s a little early for high-fives,” said Bill Adams, chief economist at Comerica Bank.

The stock market reacted to the news with a strong finish to the week as technology companies led a broad rally. Wall Street notched its best week in 18 months. The gain broke a seven-week losing streak for the market, the longest such stretch since 2001.

The S&P 500 rose 2.5% and finished 6.6% higher for the week, its best weekly gain since November 2020.

Adams noted that gas and food prices have risen in May and that Russia’s war against Ukraine and COVID-19-related lockdowns in China could further disrupt supply shortages and send prices accelerating again.

Americans have been able to keep spending, despite higher inflation, because of rising wages, a stockpile of savings built up during the pandemic and a rebound in credit card use. Economists say those factors could bolster spending and support the economy for much of this year.

Incomes rose 0.4% from March to April, Friday’s report showed, slightly faster than inflation.