US Consumer Spending Up, Best In 5 Months

Americans boosted their spending by 0.6 percent in April, the biggest increase in five months, while a gauge of inflation remained at the Federal Reserve's optimal level for a second straight month.

The Commerce Department said on Thursday that last month's increase in consumer spending was the largest increase since a 0.7 percent rise last November. The gain is an encouraging sign that consumer spending is beginning to show life after nearly stalling out at the beginning of the year.

The 0.6 percent rise in consumer spending followed a strong 0.5 percent gain in March and reflected a 0.3 percent increase in purchases of durable goods such as cars and a 0.9 percent jump in spending on non-durable goods, an increase that was heavily influenced by the recent rise in gasoline prices.

An inflation measure closely watched by the Fed rose by 2 percent in April, compared with a year ago, the second month it has achieved the Fed's target for inflation after years of chronically low inflation.

The Fed seeks to manage the economy to achieve moderate annual gains in inflation of around 2 percent. However, for the past six years it has failed to achieve that goal as the fallout from the country's worst recession in seven decades depressed wages and made it hard for businesses to raise prices.

Now that inflation is finally rising to the Fed's target level, the expectation is that the central bank will continue to gradually raise its benchmark interest rate to make sure the economy does not overheat. The Fed is expected to boost rates for a second time this year when it meets in June. (AP)