Annual Inflation Reaches Highest in Nearly 3 Years as High Gas Prices Hit Consumer Spending

11:09 AM EDT, 05/28/2026 (MT Newswires) -- Annual inflation hit the highest reading in almost three years in April even as consumer spending moderated in the face of high gasoline prices in the US.

The personal consumption expenditure price index jumped 3.8% year over year in April, the largest print since May 2023, Bureau of Economic Analysis data showed Thursday. That matches expectations in a Bloomberg-compiled poll and follows a 3.5% gain in March.

PCE inflation, excluding food and energy, accelerated to 3.3%, as expected, from 3.2% in March.

Consumer spending growth eased to 0.5% from 1% in March, the data showed. Inflation-adjusted real PCE rose by 0.1% in April after a 0.3% increase the month prior.

"The impact of higher gas prices was once again front and center in this report," Ksenia Bushmeneva, economist at TD Economics, said in a report. "Spending increased in nominal terms, but gains were modest after adjusting for inflation, with the squeeze of higher gas prices -- which have remained above $4 per gallon since the end of March -- weighing on consumption."

Gasoline prices in the US have surged as the Iran war pushed crude oil costs higher due to the effective closure of the Strait of Hormuz.

"Rising equity prices, a stable labor market, and larger tax refunds have provided support to the consumer through the early days of the energy shock," Bushmeneva said. "However, high gas prices and slower wage growth among low-income workers will reinforce the K-shaped dynamics in consumer spending."

On a month-on-month basis, inflation slowed to 0.4% from 0.7%, while Wall Street expected a 0.5% increase. The core PCE price index fell to 0.2% growth from March's 0.3% increase, which was the consensus for April.

"If elevated inflation continues, we can expect slower trend real consumer spending ahead," Scott Anderson, chief US economist at BMO, said in a report.

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