U.S. personal spending rose at a steady, yet moderate pace in April after a stimulus-fueled binge a month earlier.

The reading is consistent with sustained growth in the biggest part of the economy and partly reflects faster inflation.

Purchases of goods and services increased 0.5 per cent following an upwardly revised 4.7 per cent jump in March that was the biggest since June, Commerce Department figures showed Friday.

The personal consumption expenditures core price gauge, which excludes food and fuel, increased 0.7 per cent, exceeding expectations and the biggest monthly advance since October 2001.

The figures indicate that even as the impact of a third round of stimulus checks wanes, consumers have the wherewithal to continue spending at a solid pace and deliver more support for economic growth.

The outsize March spending gain provided a robust hand-off to growth in the second quarter. Combined with the April increase, the figures help explain why economists currently forecast the economy will accelerate to a 9.4 per cent annualized pace after a 6.4 per cent rate in the first quarter.

Estimates in a Bloomberg survey of economists called for a 0.5 per cent increase in personal spending and a 0.6% pickup in the core PCE price gauge. U.S. stocks rose in early trading, Treasuries were steady and the dollar strengthened.

In a separate report Friday, the U.S. merchandise trade deficit unexpectedly narrowed in April as exports climbed and imports fell from a record high.

Read more: U.S. Goods-Trade Gap Narrows for First Time in 2021

The overall PCE index rose 0.6 per cent in April for a second month. Adjusting for the increase in inflation, spending decreased 0.1 per cent in April after an upwardly revised 4.1 per cent increase a month earlier. Goods outlays declined 1.3 per cent, while spending on services rose 0.6 per cent.

Incomes dropped 13.1 per cent after surging 20.9 per cent in March when many Americans received another round of federal stimulus checks.

The April data showed transfer receipts that include stimulus payments and unemployment aid declined from a month earlier. That figure will likely fall further in the coming months as some states phase out federal jobless programs and the last stimulus checks get distributed.

The good news is that wages and salaries increased one per cent for a second month. The personal savings rate fell to 14.9 per cent, and disposable incomes, which exclude taxes and are adjusted for inflation declined 15.1 per cent in April.

Inflation Gauge

The core price index jumped 3.1 per cent from April 2020. the largest increase since July 1992. The PCE price index -- which the Federal Reserve officially uses for its inflation target -- rose 3.6 per cent from a year earlier.

However, the year-over-year inflation metrics are being distorted by so-called base effects. Because of the very weak inflation prints at the start of the pandemic, annual increases in the price metrics appear larger than they would typically.

Concerns about inflation have been hotly debated among politicians, economists and investors in recent months, with some arguing price increases are transitory and others worrying about elevated costs in the longer-term, especially with President Joe Biden’s plans for trillions in government spending in the coming decade.

In a series of speeches this week, some Fed officials pushed back against the threat that a spike in price pressures will prove lasting as the U.S. economy reopens.

“A very important part of inflation dynamics is longer-term inflation expectations and those have been extremely well anchored, implying that if we saw some development pushing inflation up I wouldn’t expect that to get embedded in the ongoing inflation rate,” Fed Governor Lael Brainard said Monday.