Friday, June 29, 2012

Consumer Spending Slows

U.S. consumer spending was flat in May for the first time in five months as Americans eased off on vehicle purchases amid tepid wage growth, but subsiding inflation pressures should keep demand supported.

The Commerce Department said on Friday April's consumer spending was revised down to show only a 0.1 percent rise instead of the previously reported 0.3 percent gain.

Weak consumer spending in May also reflected tepid sales at service stations as the pump price of gasoline fell from lofty levels early in the year. 

Spending rose 0.1 percent after adjustment for inflation. Consumer spending accounts for more than two-thirds of U.S. economic activity. The small rise could cause economists to tweak their second-quarter forecasts for real consumer spending - currently in a range of 2 percent to 2.3 percent.
More here.
Consumer spending in the U.S. stalled in May as slower job gains and a lack of wage growth prompted Americans to cut back. 

Purchases were unchanged, the weakest since November, after a 0.1 percent rise the prior month that was smaller than initially reported, Commerce Department figures showed today in Washington. The median estimate of 75 economists surveyed by Bloomberg News called for no change in so-called nominal sales. 

Merchants from CarMax Inc. (KMX) to Red Robin Gourmet Burgers Inc. (RRGB) are feeling the pinch of restrained household incomes as the jobless rate exceeds 8 percent for 40 straight months. While gasoline prices are less of a burden on Americans, the absence of bigger employment gains will make it tough for spending and the expansion to accelerate. 

“Consumers are struggling with a lack of income growth, and the consequence is spending is suffering,” said Ward McCarthy, chief financial economist at Jefferies & Co. in New York, who forecast stagnant spending. “The decline in gasoline prices, especially if it continues, will provide some relief going forward, but income growth is the impediment right now.”

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