Consumers boost spending in April as inflation surged

Service sector saw 1.1% rise for travel, restaurants

Americans increased their spending by 0.5% in April, a slowdown after a massive gain in March that had been powered by the distribution of billions of dollars in individual stimulus checks.

Even with the pullback from a 4.7% surge in spending in March, the April increase provided further evidence that consumers are driving a strengthening recovery from the pandemic recession. The April gain was led by a 1.1% rise in spending on services, the sector that covers airline travel, hotels and restaurants — areas that were devastated by the pandemic-caused shutdowns a year ago.

Friday’s report also showed that inflation by a measure preferred by the Federal Reserve surged by a bigger-than-expected 3.6% for the 12 months that ended in April. Even excluding the volatile food and energy categories, core inflation over that period was a still high 3.1%.

Both figures are far above the Fed’s 2% annual inflation target. Yet the current year-over-year inflation figures are likely temporarily elevated. That’s because when the pandemic paralyzed the economy in early spring last year, many prices plummeted before rebounding later in the year. That factor at least partly explains why the 12-month inflation figures look so large. They are expected to ease in the coming months, although inflation pressures have been surfacing in the prices of many goods and components — a result, in most cases, of supply shortages.

In its report Friday on consumer spending in April, the government said that goods purchases fell 0.6%. To some economists, this suggested that consumers have embarked on a long-anticipated shift away from the large goods purchases many of them had made while hunkered down at home to spending