Signals mixed on US economy

The annual pace of US inflation was 1.7% in April, according to the Commerce Department

A mixed portrait of US economic health has emerged, with a rise in consumer spending but a dip in confidence.

Consumer spending grew 0.4% from March to April, picking up after a soft start to the year, the Commerce Department said on Tuesday.

But the annual inflation rate was 1.7%, remaining below the 2% target set by policymakers.

In a separate survey of consumer sentiment, confidence in the economy slipped.

Policymakers are trying to read a mix of signals from the US economy, as the country extends one of the longest streaks of economic growth in its history.

Several key metrics suggest a slow start to the year. The question is whether the slowdown was transitory.

The Commerce Department's report on Tuesday showed a key measure of inflation edging up 0.2% in April, rebounding after a fall in March.

The inflation gain in April suggests "the recent weakness [in the economy] was likely transitory," analyst Ryan Sweet of Moody's Analytics wrote in a report.

"But there still isn't a ton of evidence that inflationary pressures are building quickly," he added.

Viewed annually, the rate of inflation slowed in April.

The price index, which tracks goods and services purchased by individuals, but strips out food and energy prices, rose 1.7% year-on-year, retreating from 1.9% annual growth in March.

US growth rate revised up to 1.2%

US jobs growth accelerates in April

The Commerce Department on Tuesday also reported a 0.4% month-to-month increase in consumer spending, the fastest growth so far this year.

But after adjusting for inflation, spending climbed only 0.2%, down from a 0.5% increase in March.

The Consumer Confidence Index, which measures sentiment on business and labour market conditions, also declined 1.5 points in May, falling for a second month in a row, while remaining relatively high the Conference Board said on Tuesday.

The prospect for continued spending growth is "bright" in the medium-term, Moody's analyst Scott Hoyt wrote.

But "risks to the outlook are large," he said, citing uncertainty over tax reform, health care policies and high values in the US stock market.