U.S. consumer spending recorded its biggest increase in more than six years in April as households stepped up purchases of automobiles, suggesting an acceleration in economic growth that could persuade the Federal Reserve to raise interest rates soon.
Though other data on Tuesday showed an ebb in consumer confidence in May, spending is likely to remain supported by strong gains in house prices, as well as a strengthening labor market, which is steadily pushing up wages.
"This takes the Fed a step and a half closer to the next increase in interest rates," said John Ryding, chief economist at RDQ Economics in New York.
Fed Chair Janet Yellen said on Friday an interest rate hike would probably be appropriate in the "coming months," if the economy continued to pick up and the labor market added jobs. Her views were similar to those expressed in minutes from the Fed's April 26-27 policy meeting published recently.