Latest news with #consumerSpending
Yahoo
3 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
Bloomberg
4 hours ago
- Business
- Bloomberg
Charting the Global Economy: Consumer Spending Weakens in US
US consumers are growing tired, according to fresh data that showed cutbacks in spending on big-ticket goods and services, extending a first-quarter demand slowdown. Inflation-adjusted consumer spending dropped last month by the most since January. Americans also stepped back from the housing market as new-home sales slid by the most in three years. At the same time, Federal Reserve policymakers indicated they're in little rush to lower interest rates.
Yahoo
14 hours ago
- Business
- Yahoo
May Consumer Spending Surprisingly Declines; Core Inflation Accelerates
Consumer spending unexpectedly declined last month as outlays on goods turned negative, while the Fe
Globe and Mail
a day ago
- Business
- Globe and Mail
U.S. consumer spending falls unexpectedly in May
U.S. consumer spending unexpectedly fell in May as the boost from the pre-emptive buying of goods like motor vehicles ahead of tariffs faded, while monthly inflation increases remained moderate. Consumer spending, which accounts for more than two-thirds of economic activity, dropped 0.1 per cent last month after an unrevised 0.2 per cent gain in April, the Commerce Department's Bureau of Economic Analysis said on Friday. Economists polled by Reuters had forecast consumer spending would edge up 0.1 per cent. President Donald Trump's sweeping tariffs, which have led businesses and households to front-run imports and goods purchases to avoid higher prices from duties, have muddled the economic picture. Economists warned it could take time for the tariff-related distortions to wash out of the data. A record goods trade deficit in the first quarter, thanks to a deluge of imports, accounted for much of the 0.5 per cent annualized rate of decline in gross domestic product during that period. U.S. consumer confidence weakens as tariffs create uncertainty over economy, job market Consumer spending also nearly braked last quarter after being propelled by households pulling forward goods purchases. Households also spent less on services last quarter, helping to restrain growth in consumer spending to only a 0.5 per cent pace, the slowest rate since the second quarter of 2020. That data potentially puts spending on a slow growth path in the second quarter. The combination of soft consumer spending and inflation is, however, unlikely to spur the Federal Reserve to resume cutting interest rates in July. Fed Chair Jerome Powell told lawmakers this week that the U.S. central bank needed more time to gauge the impact of tariffs on prices before considering a rate cut. Economists argue that price increases have remained moderate because businesses are still selling inventory accumulated before the tariffs went into effect. They expect inflation will start picking up, beginning with consumer price data for June. U.S. economy shrank 0.5% in the first quarter, worse than earlier estimates had revealed The Personal Consumption Expenditures (PCE) Price Index gained 0.1 per cent in May, matching the rise in April, the BEA said. In the 12 months through May, PCE inflation increased 2.3 per cent after climbing 2.2 per cent in April. Stripping out the volatile food and energy components, the PCE Price Index increased 0.2 per cent last month. That followed a 0.1 per cent rise in the so-called core PCE inflation in April. In the 12 months through April, core inflation advanced 2.7 per cent after rising 2.6 per cent in April. The Fed tracks the PCE price measures for its 2 per cent inflation target. The central bank last week left its benchmark overnight interest rate in the 4.25-4.50 per cent range, where it has been since December.
Zawya
a day ago
- Business
- Zawya
US consumer spending falls unexpectedly in May
U.S. consumer spending unexpectedly fell in May as the boost from the pre-emptive buying of goods like motor vehicles ahead of tariffs faded, while monthly inflation increases remained moderate. Consumer spending, which accounts for more than two-thirds of economic activity, dropped 0.1% last month after an unrevised 0.2% gain in April, the Commerce Department's Bureau of Economic Analysis said on Friday. Economists polled by Reuters had forecast consumer spending would edge up 0.1%. President Donald Trump's sweeping tariffs, which have led businesses and households to front-run imports and goods purchases to avoid higher prices from duties, have muddled the economic picture. Economists warned it could take time for the tariff-related distortions to wash out of the data. A record goods trade deficit in the first quarter, thanks to a deluge of imports, accounted for much of the 0.5% annualized rate of decline in gross domestic product during that period. Consumer spending also nearly braked last quarter after being propelled by households pulling forward goods purchases. Households also spent less on services last quarter, helping to restrain growth in consumer spending to only a 0.5% pace, the slowest rate since the second quarter of 2020. That data potentially puts spending on a slow growth path in the second quarter. The combination of soft consumer spending and inflation is, however, unlikely to spur the Federal Reserve to resume cutting interest rates in July. Fed Chair Jerome Powell told lawmakers this week that the U.S. central bank needed more time to gauge the impact of tariffs on prices before considering a rate cut. Economists argue that price increases have remained moderate because businesses are still selling inventory accumulated before the tariffs went into effect. They expect inflation will start picking up, beginning with consumer price data for June. The Personal Consumption Expenditures (PCE) Price Index gained 0.1% in May, matching the rise in April, the BEA said. In the 12 months through May, PCE inflation increased 2.3% after climbing 2.2% in April. Stripping out the volatile food and energy components, the PCE Price Index increased 0.2% last month. That followed a 0.1% rise in the so-called core PCE inflation in April. In the 12 months through April, core inflation advanced 2.7% after rising 2.6% in April. The Fed tracks the PCE price measures for its 2% inflation target. The central bank last week left its benchmark overnight interest rate in the 4.25%-4.50% range, where it has been since December. (Reporting by Lucia Mutikani; Editing by Paul Simao)
