Wells Fargo: US momentum in consumer spending continued into Q2

Data released on Friday has showed that US Personal Spending surged in April by 0.9%, above expectations. Wells Fargo’s analysts point out that for the first time since October 2021 income outpaced inflation. Analysts also forecast consumer spending will downshift over the next quarters.

Key Quotes:

“Personal income rose 0.4% in April, with another solid gain in wages & salaries which are now over 15% above their pre-pandemic level. Once removing transfers and adjusting for inflation, real disposable personal income rose 0.02%. With this marking the first time in five months that income outpaced inflation, as expected the level of real disposable income looks to have bottomed in March.”

“We forecast consumer spending will downshift over the next several quarters, particularly as rate hikes begin to ratchet up the cost of credit. Even though we expect consumer spending to remain below trend throughout the forecast period, we do not look for sustained declines in outlays.”

“On the day after revised GDP numbers showed an even faster pace of consumer spending in the first quarter, fresh data today for April showed that momentum continued into the second quarter. Personal spending shot up 0.9% in the month and, after adjusting for inflation, real spending still added 0.7%; that comes on the heels of revisions that more than doubled March’s real spending gain from 0.2% to 0.5%.