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Consumers ‘Taking Higher Prices in Stride,’ Data Shows

Despite concerns that inflation would keep shoppers from burning through their disposable income, consumer spending on clothing and footwear increased a seasonally adjusted 1.9 percent in April from the prior month to $505.4 billion, the U.S. Bureau of Economic Analysis (BEA) revealed Friday in its Personal Income and Outlays report.

Personal consumption expenditures (PCE) on furnishings and durable household equipment inched up 0.5 percent for the month to $490.33 billion. It was the first monthly gain in that category since January, while clothing and footwear outlays rose for the third consecutive month.

Similarly, data released earlier this month from the National Retail Federation (NRF) and the Census Bureau showed clothing and clothing accessories store sales were up a seasonally adjusted 0.8 percent month over month. Furniture and home furnishings store sales rose 0.7 percent fo the month.

It probably didn’t hurt that retail apparel prices fell a seasonally adjusted 0.8 percent in April, ending a string of six consecutive increases, according to the Bureau of Labor Statistics’ Consumer Price Index.

“April’s retail sales data is encouraging because it shows consumers are taking higher prices in stride and remain resilient,” NRF chief economist Jack Kleinhenz said after April retail sales were reported. “Sales benefited from Easter-Passover spending and also from tax refunds, which have been delayed by pandemic-related issues at the IRS but are also larger than usual. High gasoline prices, rising interest rates and price pressures across the board continue to be headwinds to spending, but wage and job gains are offsetting that with a tailwind that should bode well for moderate-but-steady spending growth going forward.”

BEA reported that overall PCE increased 0.9 percent, or $152.3 billion, in April. Real PCE, adjusted for inflation, gained 0.7 percent, with goods spending up 1 percent, or $48.6 billion, and services increasing 0.5 percent, or $103.7 billion, according to BEA.

Within goods, increases were widespread across all components except for gasoline and other energy goods. Spending for motor vehicles and parts was the leading contributor to the increase. Within services, increases were also widespread across all components, led by food services and accommodations, as well as housing and utilities.

The PCE price index increased 0.2 percent, and the core index, excluding food and energy, rose 0.3 percent. Compared to April 2021, the PCE price index was up 6.3 percent, reflecting increases in goods and services. Energy prices rose 30.4 percent in the period, while food prices increased 10 percent. Excluding food and energy, the PCE price index for April increased 4.9 percent from a year earlier.

Personal income increased 0.4 percent, or $89.3 billion, in April. Disposable personal income (DPI), a key gauge if retail spending, rose, 0.3 percent, or $48.3 billion. Real DPI increased less than 0.1 percent in the month.

BEA said the increase in personal income in April primarily reflected a gain in compensation and personal income receipts on assets that were partly offset by a decrease in proprietors’ income. Within compensation, the increase reflected increases in private and government wages and salaries.

Personal outlays increased $155.3 billion in April. Personal saving was $815.3 billion and the personal saving rate–personal saving as a percentage of disposable personal income–was 4.4 percent.

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