Consumer spending up 0.3% last month
WASHINGTON — Consumers spent more in May as their income rose, encouraging signs after a slow start to the year. But spending was weaker in April, February and January than had been estimated.
The Commerce Department said Thursday that consumer spending rose 0.3 percent last month, nearly erasing a similar decline in April. Income rose 0.5 percent.
At the same time, economists said the downward revisions to spending for three of the first four months of the year signal weaker growth in the April-June quarter, which ends this week.
Paul Dales, senior national economist at Capital Economics, said he thinks growth has slowed in the second quarter at an annual rate of just 1.5 percent. That's down from his previous forecast of a 2 percent rate. Economists at Barclays have cut their forecast from an annual rate of 1.8 percent to a sluggish rate of 1.4 percent.
Tepid growth could keep the Federal Reserve from scaling back its bond purchases this year. Chairman Ben Bernanke spooked investors last week when he said the Fed is likely to slow its bond-buying this year if the economy continues to strengthen. Bernanke added that if the economy weakens, the Fed won't hesitate to delay its pullback or even step up its bond purchases again.
Dales noted that the inflation gauge the Fed watches most closely has dropped to a record low of 1.1 percent, well below the Fed's 2 percent target. When inflation falls too low, the Fed normally keeps rates low to try to boost prices.
Economists are hopeful that growth will pick up in the second half of the year, and some recent data have been encouraging. Consumers, benefiting from low inflation, spent more at retail businesses in May, notably for cars, home improvements and sporting goods.
American factories are fielding more orders. Higher home sales and prices are signaling a steady housing recovery. And employers added 175,000 jobs last month, in line with the average job growth over the past 12 months.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Shell shovels millions into proposed Beaver County plant site
- Muni bond funds stressed
- Off-duty but on call: Suits seek overtime
- Consol Energy, Range Resources report 2Q losses, plan deeper cuts
- Trib 30 index slips in July; 29 percent drop makes ATI biggest loser
- Extended oil slump takes toll
- U.S. asks Supreme Court to reinstate convictions of portfolio managers who won on appeal
- ATI to benefit from WTO ruling against China in steel case
- FedEx faces in-depth probe of bid to buy Dutch express company
- PPG puts brand 1st in strategy to reach commercial paint market
- Post-Gazette offers voluntary buyouts in bid to avoid layoffs