US consumer spending stays flat in May
Source: Agencies |
June 28, 2011, Tuesday
|
Print Edition
Print Edition
AMERICANS spent at the weakest pace in 20 months, a sign that high gas prices are taking a toll on the economy.
Consumer spending was unchanged in May, the US Commerce Department said yesterday. That was the worst result since September 2009. And when adjusted for inflation, spending actually dropped 0.1 percent.
April's consumer spending figures were revised to show a similar decline when adjusting for inflation. It marked the first decline in inflation-adjusted spending since January 2010.
Incomes rose 0.3 percent for the second straight month. But adjusted for inflation, after-tax incomes increased only 0.1 percent in May, after falling by the same amount in the previous month.
Neil Dutta, an economist at Bank of America Merrill Lynch, said inflation-adjusted, after-tax income is now slightly lower than in January.
"It was a very poor report all around," he said. "I think it's clear that higher gasoline prices are taking a bite out of consumer spending."
Consumer spending accounts for 70 percent of economic activity. The spike in gas prices has forced many consumers to cut back on discretionary purchases, such as furniture and vacations, which help boost growth.
Fewer jobs and high unemployment have left workers with little leverage to ask for raises. And slow wage growth hurts the broader economy because consumers have less money to spend.
Hiring slowed considerably this spring after a strong start at the beginning of the year. The economy created only 54,000 jobs in May, the lowest amount in eight months. That followed three months in which employers hired an average of 220,000 net new workers each month. The unemployment rate rose to 9.1 percent last month.
Consumer spending was unchanged in May, the US Commerce Department said yesterday. That was the worst result since September 2009. And when adjusted for inflation, spending actually dropped 0.1 percent.
April's consumer spending figures were revised to show a similar decline when adjusting for inflation. It marked the first decline in inflation-adjusted spending since January 2010.
Incomes rose 0.3 percent for the second straight month. But adjusted for inflation, after-tax incomes increased only 0.1 percent in May, after falling by the same amount in the previous month.
Neil Dutta, an economist at Bank of America Merrill Lynch, said inflation-adjusted, after-tax income is now slightly lower than in January.
"It was a very poor report all around," he said. "I think it's clear that higher gasoline prices are taking a bite out of consumer spending."
Consumer spending accounts for 70 percent of economic activity. The spike in gas prices has forced many consumers to cut back on discretionary purchases, such as furniture and vacations, which help boost growth.
Fewer jobs and high unemployment have left workers with little leverage to ask for raises. And slow wage growth hurts the broader economy because consumers have less money to spend.
Hiring slowed considerably this spring after a strong start at the beginning of the year. The economy created only 54,000 jobs in May, the lowest amount in eight months. That followed three months in which employers hired an average of 220,000 net new workers each month. The unemployment rate rose to 9.1 percent last month.
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