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Economic Report: U.S. consumer spending rises sharply, but inflation climbs almost as fast

The numbers: Consumer spending rose a sharp 1.1% in March, but the increase barely outpaced another surge in inflation as Americans confront the biggest price increases in 40 years.

Economists polled by The Wall Street Journal had forecast a 0.7% rise.

Although households spent more, they are also paying higher prices for gas, groceries and other staples.

A key measure of inflation also included in the report rose by 0.9% last month, government figures showed. A big jump in gasoline prices was a chief reason why.

Incomes increased by a smaller 0.5% last month. Wages have also risen sharply over the past year, but not as fast as the cost of living.

Big picture: The U.S. economy has downshifted into a lower gear after a rapid burst of growth last year. Yet consumers and businesses are still spending and investing at fairly healthy levels — even after taking high inflation into account.

The economy is likely to keep expanding at a steady clip, economists say, but rising U.S. interest rates and more turbulence overseas in Ukraine and China loom as ongoing threats. If inflation gets worse it could spell even more trouble.

The so-called PCE price index leaped 6.6% in the 12 months ended in March. And a better known measure of the cost of living, the consumer price index, has risen at an even faster 8.5% pace.

Market reaction: The Dow Jones Industrial Average

and S&P 500

were set to open lower in Friday trades.

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