Aurelia Butler

The unchanged reading in consumer spending last month, reported by the Commerce Department on Friday, followed a downwardly revised 0.1% gain in February. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was previously reported to have increased 0.2% in February. Economists polled by Reuters had forecast consumer spending dipping 0.1%.The data was included in the advance gross domestic product report for the first quarter published on Thursday, which showed consumer spending surging at a 3.7% annualized rate that period after rising at a 1.0% pace in the October-December quarter. The overall economy grew at a 1.1% pace as the acceleration in consumer spending was offset by businesses liquidating inventories in anticipation of weaker demand later this year. The economy expanded at a 2.6% rate in the fourth quarter.Last month’s flat reading in consumer spending set consumption on a lower growth path in the second quarter. It likely reflected Americans becoming more averse to higher prices as well as the expiration of a temporary boost to the Supplemental Nutrition Assistance Program (SNAP) benefits authorized by the U.S. Congress to cushion low-income people and families against the hardships of the COVID-19 pandemic.SNAP is commonly known as food stamps. Researchers from the Commerce Department’s Census Bureau on Thursday estimated the end of the extra benefits had resulted in roughly 32 million people getting smaller monthly SNAP payments. They estimated that a household of four with a net monthly income of $2,000 was now getting $600 less in food stamps each month. The economy is facing several headwinds, including higher interest rates as the Fed fights inflation, and tightening credit conditions, which could crimp both consumer and business spending. A standoff to raise the federal government’s $31.4 trillion borrowing cap also poses a threat. The Fed is expected to increase interest rates by another 25 basis points next week, potentially the last hike in the U.S. central bank’s fastest monetary policy tightening cycle since the 1980s. The Fed has raised its policy rate by 475 basis points since March of last year from the near-zero level to the current 4.75%-5.00% range.Though inflation remains elevated, it is gradually slowing. The personal consumption expenditures (PCE) price index gained 0.1% in March after rising 0.3% in February. In the 12 months through March, the PCE price index increased 4.2% after climbing 5.1% in February.Excluding the volatile food and energy components, the PCE price index rose 0.3% after increasing 0.3% in February. The so-called core PCE price index gained 4.6% on a year-on-year basis in March after rising 4.7% in February. The Fed tracks the PCE price indexes for its 2% inflation target. More

The country’s infrastructure output last grew at a slower pace, of 0.1% year-on-year, in October 2022.Infrastructure output—which comprises eight sectors, including coal and electricity, accounting for nearly 40% of industrial output—rose 7.6% in the April 2022 to March 2023 financial year, the data showed.”The output of some of the sectors is likely to have been dampened by the unseasonal rainfall, (including sectors) such as electricity and cement which displayed a YoY contraction in March, along with crude oil,” said Aditi Nayar, an economist at ICRA.The output from sectors such as coal, fertilisers and steel displayed a healthy expansion, in excess of 8%, in March, which is encouraging, Nayar added. More

FRANKFURT/MADRID (Reuters) – The euro zone economy is barely growing but inflation in the bloc remains high, leaving the European Central Bank with little choice but to inflict more financial pain on households and businesses to tame prices.Buffeted for more than a year by the surge in fuel prices that followed Russia’s invasion of Ukraine, people in the 20 countries that share the euro are now starting to feel the effects of the ECB’s massive increase in borrowing costs.Economic output in the euro zone increased by just 0.1% in the first three months of the year as domestic consumption stagnated in many economies, a sign that surging inflation and falling real incomes are taking their toll on consumers.Growth came mostly from exports, the result of a revival in global trade as China re-opened for business after the pandemic.But national data showed price growth was only falling slowly, probably leaving the ECB with no choice but to keep raising interest rates.”Individual country inflation data keeps pressure on the European Central Bank to remain aggressive on the hiking front at next week’s central bank meeting despite euro-wide growth not that far from flatlining,” said Charles Hepworth, an investment director at asset manager GAM Investments.The ECB is widely expected to raise rates for the seventh straight meeting on May 4, with policymakers weighing another half-percentage-point (50 basis points) hike against the merits of slowing rises down to a quarter-point.Friday’s inflation data showed progress was slow.Inflation in Germany fell to 7.6% in April from 7.8% a month earlier. While Portugal and Ireland saw sharper drops in price growth, this remained far above the ECB’s 2% target.And inflation even rose in France and Spain, largely as a result of some energy subsidies being reduced or phased out. But in a potential glimpse of sun for the ECB, there were some signs food prices are easing in both countries as well as Germany.Surging grocery bills have been a key driver of overall inflation across the euro zone in recent months, driven by higher fuel costs, unfavorable weather and some margin expansion by companies.Inflation data for the euro zone as a whole will be released on May 2, along with an ECB survey of banks that policymakers view as critical in informing their upcoming decision.IMF CALLS FOR MORE RATE HIKESMoney markets currently price in another 70 basis points of ECB rate hikes by October, possibly followed by cuts as early as the start of next year. The International Monetary Fund challenged those expectations on Friday, calling on the ECB to keep raising interest rates until the middle of 2024.It also said European Union finance ministers should tighten fiscal policy in concerted action to bring down high inflation, which would probably depress consumption further.But economists said rate increases by the ECB and other central banks since last year were already likely to curb economic growth in the coming months, and might even push the euro zone into recession.”In the second half of the year the massive rate hikes by central banks worldwide are likely to apply the brake on growth,” Commerzbank (ETR:CBKG)’s senior economist Christoph Weil said.The euro zone’s largest economy, Germany, was already stagnating as a decline in government and household consumption offset an increase in exports and capital investment.Southern European economies Italy, Spain and, to a lesser extent, Portugal were the stand-out beneficiaries of a boost in trade, growing by 0.3%-0.5% in January to March compared with the last three months of 2022.But Spain and Portugal, where a high proportion of floating-rate mortgages makes the surge in interest rates particularly painful for households, saw private consumption fall or decelerate. “All the (Spanish) growth comes from the foreign sector given a huge rebound in exports,” Angel Talavera, an economist at Oxford Economics, said. (Additional reporting Miranda Murray and Maria Martinez in Berlin, Andrei Khalip in Lisbon, Geert de Clercq in Paris, Gavin Jones in Rome and Padraic Halpin in Dublin; Editing by Toby Chopra and Catherine Evans) More

(Reuters) – Traders of futures tied to the Federal Reserve’s policy rate on Friday firmed up bets the U.S. central bank will raise its benchmark rate a final time in May after the government reported core inflation rose 4.6% in March from a year earlier.U.S. short-term interest rate futures were down slightly after the report, reflecting about a 90% chance of a quarter-of-a-percentage-point rate hike in May. The current target range is 4.75%-5.00%. More

Inflation: Economists expect the Federal Reserve’s preferred inflation gauge, the core personal consumption expenditures price index, rose 0.3 per cent in March, matching February’s monthly increase. The annual increase is expected to slide to 4.5 per cent.Consumer spending: That same PCE report is also expected to show personal consumption ticked down to a seasonally adjusted 0.1 per cent decline in March, as the US economy slows in the face of the Federal Reserve’s monetary tightening.Corporate results: Companies reporting before the bell include consumer goods manufacturers Newell Brands and Colgate-Palmolive.Employment cost index: One of the Federal Reserve’s favourite wage metrics is expected to show employment costs increased 1.1 per cent, as the central bank struggles to rein in wage growth.US consumer sentiment: The University of Michigan’s consumer sentiment index is forecast to report a final reading of 63.5 in April, compared to 62 last month. More