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Published: Thursday, 6/27/2013

Consumer spending up 0.3% in May

Americans' income rises 0.5%

ASSOCIATED PRESS

WASHINGTON — U.S. consumers spent more in May as their income increased, encouraging signs after a slow start to the year.

The Commerce Department said today that consumer spending rose 0.3 percent last month, nearly erasing a similar decline in April. But the government also said spending was weaker in April, February, and January than previously estimated.

Income rose 0.5 percent in May, much better than the 0.1 percent April increase. Still, after-tax income has risen just 1.1 percent over the past year after taking inflation into account.

Americans chose to put a little more away last month, too. The savings rate rose to 3.2 percent in May, up from 3 percent in April. That was the highest since December.

Consumers are benefiting from low inflation. A measure of prices ticked up just 1 percent in May compared with a year ago, well below the Federal Reserve 2 percent target. Some Fed critics believe the central bank should be considering further support for the economy to guard against deflation, a destabilizing period of falling prices.

Consumer spending is watched closely because it accounts for 70 percent of economic activity.

Economists said the downward revisions to three of the first four months of the year signal weaker growth in the April-June quarter, which ends this week.

Paul Dales, senior U.S. economist at Capital Economics, said his group now expects growth has slowed in the second quarter at an annual rate of just 1.5 percent. That’s down from its previous forecast of a 2 percent rate.

Economists at Barclays cut their forecast from a rate of 1.8 percent to 1.4 percent.



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