Latest news with #May2023
Yahoo
10 hours ago
- Business
- Yahoo
Consumers saw a double whammy of bad news in May, pulling back on spending as inflation heated up
Consumer spending in May fell for the first time this year, the Commerce Department reported Friday, indicating that weakening consumer confidence is starting to affect the checkout line. Meanwhile, inflation ticked up and is projected to rise even more due to tariffs, economists say, predicting a 'summer slowdown.' For the first time this year, consumers pulled back on spending as the bad mood that's been pervasive since tariffs hit caught up with retail data. Overall spending in May fell 0.1% from the prior month and incomes fell 0.4%, the Commerce Department reported Friday. Coming on the heels of a report that first-quarter GDP shrank more than expected, the data show a rapidly downshifting economy. 'Personal consumption expenditures are weak and continue to weaken,' Eugenio Aleman, chief economist at Raymond James, told Fortune. 'We knew that consumer demand has been on the weak side, but yesterday we had the revision to the first-quarter GDP, which reaffirmed that consumption wasn't that strong. Today's number just confirmed that this wasn't a one-off.' Both spending and income figures were distorted by one-time changes. Spending on cars plunged, pulling down overall spending, because Americans had moved more quickly to buy vehicles in the spring to get ahead of tariffs. But spending on airfares, meals, and hotels all fell last month—signs of underlying consumer pressure rather than mere timing shifts. Spending on services overall rose just 0.1% in May, the lowest one-month increase in four and a half years. 'Because consumers are not in a strong enough shape to handle those (higher prices), they are spending less on recreation, travel, hotels, that type of thing,' said Luke Tilley, chief economist at Wilmington Trust. Retail sales also dropped sharply last month, contracting 0.9%, according to a separate report released last week. Incomes also dropped after a one-time adjustment to Social Security benefits boosted payments in March and April, allowing some retirees who had worked for state and local governments to get higher Social Security payments. Inflation heated up modestly, with prices rising at a 2.3% annual rate in May, compared with 2.1% in April. Core prices, which exclude volatile food and energy costs, increased 2.7% from a year earlier, up from April's 2.6% rate. In the first three months of this year, consumer spending rose just 0.5% and has been sluggish in the first two months of the second quarter. Most economists think May's figures signal a dramatic downshift to come. 'The US economy is poised for a summer slowdown,' EY economists wrote. 'Both consumer spending and business investment are expected to decelerate significantly.' In recent years, consumers have been able to keep spending more thanks to real income growth and a boost to some government benefits. 'But these two supports have now mostly faded, and the real income picture is about to deteriorate rapidly, as tariffs drive up prices,' economist at Pantheon Macroeconomics said. With personal savings low and consumers too skittish to borrow, 'consumption is likely to slow much further, and soon,' they said. Real incomes are set to flatten this year, due partly to a weaker job market but also because prices are rising, they wrote. At the same time, the rate of inflation—2.7% annually—is significantly higher than the Federal Reserve's 2% target, making it unlikely rate cuts are coming anytime soon. 'With so many uncertainties still lingering, the Fed will likely hold off on rate cuts for the time being,' Nationwide Financial Markets Economist Oren Klachkin said. This story was originally featured on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
13 hours ago
- Business
- Yahoo
Consumers saw a double whammy of bad news in May, pulling back on spending as inflation heated up
Consumer spending in May fell for the first time this year, the Commerce Department reported Friday, indicating that weakening consumer confidence is starting to affect the checkout line. Meanwhile, inflation ticked up and is projected to rise even more due to tariffs, economists say, predicting a 'summer slowdown.' For the first time this year, consumers pulled back on spending as the bad mood that's been pervasive since tariffs hit caught up with retail data. Overall spending in May fell 0.1% from the prior month and incomes fell 0.4%, the Commerce Department reported Friday. Coming on the heels of a report that first-quarter GDP shrank more than expected, the data show a rapidly downshifting economy. 'Personal consumption expenditures are weak and continue to weaken,' Eugenio Aleman, chief economist at Raymond James, told Fortune. 'We knew that consumer demand has been on the weak side, but yesterday we had the revision to the first-quarter GDP, which reaffirmed that consumption wasn't that strong. Today's number just confirmed that this wasn't a one-off.' Both spending and income figures were distorted by one-time changes. Spending on cars plunged, pulling down overall spending, because Americans had moved more quickly to buy vehicles in the spring to get ahead of tariffs. But spending on airfares, meals, and hotels all fell last month—signs of underlying consumer pressure rather than mere timing shifts. Spending on services overall rose just 0.1% in May, the lowest one-month increase in four and a half years. 'Because consumers are not in a strong enough shape to handle those (higher prices), they are spending less on recreation, travel, hotels, that type of thing,' said Luke Tilley, chief economist at Wilmington Trust. Retail sales also dropped sharply last month, contracting 0.9%, according to a separate report released last week. Incomes also dropped after a one-time adjustment to Social Security benefits boosted payments in March and April, allowing some retirees who had worked for state and local governments to get higher Social Security payments. Inflation heated up modestly, with prices rising at a 2.3% annual rate in May, compared with 2.1% in April. Core prices, which exclude volatile food and energy costs, increased 2.7% from a year earlier, up from April's 2.6% rate. In the first three months of this year, consumer spending rose just 0.5% and has been sluggish in the first two months of the second quarter. Most economists think May's figures signal a dramatic downshift to come. 'The US economy is poised for a summer slowdown,' EY economists wrote. 'Both consumer spending and business investment are expected to decelerate significantly.' In recent years, consumers have been able to keep spending more thanks to real income growth and a boost to some government benefits. 'But these two supports have now mostly faded, and the real income picture is about to deteriorate rapidly, as tariffs drive up prices,' economist at Pantheon Macroeconomics said. With personal savings low and consumers too skittish to borrow, 'consumption is likely to slow much further, and soon,' they said. Real incomes are set to flatten this year, due partly to a weaker job market but also because prices are rising, they wrote. At the same time, the rate of inflation—2.7% annually—is significantly higher than the Federal Reserve's 2% target, making it unlikely rate cuts are coming anytime soon. 'With so many uncertainties still lingering, the Fed will likely hold off on rate cuts for the time being,' Nationwide Financial Markets Economist Oren Klachkin said. This story was originally featured on Sign in to access your portfolio
Wall Street Journal
a day ago
- Business
- Wall Street Journal
Personal Income Data Skewed by Social Security ‘Catch-Up' Payments
A drop in personal income in May data released Friday is largely attributable to an anomaly in Social Security payments, according to Troy Ludtka, senior U.S. economist at SMBC Nikko Securities Americas. Personal income decreased 0.4% from the prior month in May, according to estimates released today by the U.S. Bureau of Economic Analysis. While this was a miss compared with many analysts' estimates of a 0.3% increase, the data isn't concerning to Ludtka, he said in a note. Federal policy changes raised benefits for some government retirees, and 'catch-up payments" boosted April's income data. Now, May's data shows a reversal, with Social Security payments falling 7.3% in May from a month earlier.
Argaam
a day ago
- Business
- Argaam
Fed's preferred inflation gauge rises to 2.7% in May
The latest reading of the Federal Reserve's preferred inflation gauge showed price increases accelerated in May. The core Personal Consumption Expenditures (PCE) price index — the Federal Reserve's preferred inflation gauge — rose by 2.7% year-on-year in May, compared to a 2.5% increase in April, above expectations of a 2.6% rise, official data released on Friday showed. The headline PCE index — which includes volatile food and energy components — increased by 2.3% year-on-year last month, following a 2.1% rise in April, in line with forecasts. On a monthly basis, the core PCE index rose by 0.2%, while the headline index edged up by 0.1%, according to the data. The report also showed that personal consumption expenditures fell by $27.6 billion last month, with personal savings reaching around $1.01 trillion. The data reflects a $19.9 billion decline in spending on services and a $49.2 billion drop in spending on goods.
CNN
a day ago
- Business
- CNN
Americans reined in their spending last month
The US economic engine sputtered in May: Consumer spending slowed more than expected, according to new data released Friday that also showed inflation heated up on an annual basis. Friday's report from the Commerce Department showed that consumer spending fell 0.1% last month after rising 0.2% in April. The Personal Consumption Expenditures price index was 2.3% for the 12 months ended in May, versus 2.1% in April. On a monthly basis, prices rose 0.1%, unchanged from April. Economists were expecting the PCE price index to rise 0.1% from April, resulting in the annual rate ticking up to 2.3%. They expected spending to pick up slightly to 0.3%, according to FactSet. This story is developing and will be updated.
