Consumer spending in US ticks up 0.4% in May

Washington - Consumer purchases moderated last month after the biggest advance since August 2009 as American households realigned outlays with slower income growth.

Personal spending climbed 0.4% in May after a 1.1% jump a month earlier that was more than initially estimated, Commerce Department figures showed on Wednesday in Washington. Incomes climbed a less-than-forecast 0.2%.

Even with the smaller advance in spending, steady job growth and a nascent pickup in wages will probably bolster household purchases after a first-quarter slowdown. With rising global uncertainty expected to stymie business investment, a resilient consumer will needed to keep the US’s growth prospects intact.

"The consumer seems reasonably well supported," James Sweeney, chief economist at Credit Suisse Securities USA in New York, said before the report. That’s primarily because "the labour market has tightened, and the labour market is mostly driven by domestic factors."

The increase in May spending matched the Bloomberg survey median. Projections ranged from gains of 0.2% to 0.5% after an initially reported 1% April increase.

Incomes were forecast to climb 0.3%. April’s income reading was revised up to a 0.5% gain from a previously reported 0.4% advance.

After adjusting for inflation, which generates the figures used to calculate gross domestic product, purchases rose 0.3% in May after a 0.8% increase in April.

Spending breakdown

Purchases of durable goods - those meant to last more than three years, such as automobiles - climbed 0.6% after adjusting for inflation following a 2.6% April advance. Spending on non-durable goods rose 0.5%, while outlays for services were up 0.1%.

The report showed the price index tied to consumer spending increased 0.2% in May. From a year earlier, the gauge was up 0.9%.

This inflation measure is preferred by Federal Reserve policy makers and hasn’t met their target in four years.

Stripping out the volatile food and energy components, the price measure also rose 0.2% from the month before, and 1.6% in the 12 months through the end of May.

Disposable income, or money left over after taxes, increased 0.1% in May from the month prior after adjusting for inflation, the smallest gain since March 2015, the report showed. It was up 3.2% in the past year.

The saving rate eased to 5.3%, the lowest this year, from 5.4%.