U.S. consumer allotting increased moderately in May and prices rose slightly, pointing to slowing economic growth and benign inflation pressures, which could relax the Federal Reserve more ammunition to cut interest rates next month.
The Commerce Department said on Friday consumer squander, which accounts for more than two-thirds of U.S. economic activity, rose 0.4% as households boosted purchases of motor agencies and spent more at restaurants and on hotel accommodation.
Data for April was revised up to show consumer spending advancing 0.6% in preference to of the previously reported 0.3% gain. Economists polled by Reuters had forecast consumer spending would rise 0.4% most recent month.
Consumer prices as measured by the personal consumption expenditures (PCE) price index rose 0.2% last month as a bounce in food prices was tempered by moderate gains in the cost of other goods. The PCE price index increased 0.3% in April.
In the 12 months at the end of ones tether with May, the PCE price index increased 1.5%, slowing from April’s 1.6% increase.
Excluding the volatile food and vigour components, the PCE price index climbed 0.2% last month after a similar gain in April. In the 12 months thoroughly May, the so-called core PCE price index increased 1.6%, matching April’s rise.
The core PCE index is the Fed’s preferred inflation direction and has undershot the U.S. central bank’s 2% target this year. The Fed last week signaled rate cuts as initial as July, citing low inflation, as well as growing risks to the economy from an escalation in trade tensions between the Coordinated States and China.
The central bank downgraded its inflation projection for 2019 to 1.5% from 1.8% in March. Fed Chairman Jerome Powell dripped his description of weak inflation as “transient.”
When adjusted for inflation, consumer spending rose 0.2% in May. This professed real consumer spending increased by the same margin in April. The increase in real spending in the last two months proposed consumer spending was struggling to accelerate after slowing in the first quarter.
Consumers spending increased at a 0.9% annualized measure in the first quarter, the slowest in a year. The overall economy grew at a 3.1% rate last quarter, boosted by exports, an stock of inventory and government spending on highways and defense.
Last month, spending on goods increased 0.5%, with expenditures on long-lasting manufactured goods such as motor vehicles surging 1.7%. Spending on services gained 0.4%.
Consumer devoting in May was supported by a 0.5% rise in personal income, which matched April’s increase. Wages gained 0.2%. Savings climb to $985.4 billion from $975.0 billion in April.