US consumer spending hits speed bump; inflation picture mixed



US consumer spending skyrocketed; Mixed magnification image<br />













































June 30, 2023


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Last updated: 10:17 PM



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Washington, June 30 (BNA): U.S. consumer spending faltered in May as households scaled back purchases of new pickup trucks and other long-running manufactured goods amid rising borrowing costs, suggesting the economy lost some speed in the second quarter.



While a Commerce Department report Friday showed annual inflation rose last month at the slowest pace in more than two years, underlying price pressures remained too strong to dissuade the Federal Reserve from returning to its strategy of raising interest rates in July, economists said. Inflation is still far above the US central bank’s 2% target.



Weak consumer spending took some of the sparkle off a batch of upbeat data on the labor and housing markets this month that painted a picture of a resilient economy, according to Reuters.



Consumer spending rose 0.1% last month. Data for April was revised downward to show spending accelerating at 0.6% instead of 0.8% as previously reported.



Spending on goods, which are usually bought on credit, decreased by 0.5%, with expenditures on cars declining by 23.3%. Spending on gasoline and other energy commodities declined by 23.4%. Spending on goods increased 0.9 in April.



Spending on services rose 0.4%, supported by health care, transportation, housing and utilities, as well as financial services and insurance. Services expenses rose 0.5% in April.



When consumer spending was adjusted for inflation, it did not change. Data for the month of April was revised downward to show alleged real consumer spending rising by just 0.2% instead of the previously reported 0.5%.



A slump in real consumer spending last month and a downward revision of April data suggested consumer spending growth slowed to around a 1.0% annual rate in the second quarter, economists estimated, after rising at a 4.2% rate in the January-March period, the fastest in nearly two years.



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