Modest rise in US consumer spending

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US consumer spending rose less than expected in May, likely held back by weak healthcare spending, which could prompt economists to temper their second-quarter growth estimates.

The Commerce Department said yesterday consumer spending increased 0.2 per cent after being flat in April. Spending, which accounts for more than two-thirds of US economic activity, had been forecast rising 0.4 per cent.

When adjusted for inflation, consumer spending fell for a second straight month, suggesting spending this quarter could struggle to regain momentum after growing at its slowest pace in nearly five years in the first quarter.

Spending in May was probably constrained by weak healthcare spending as outlays on services barely rose for a second month. Spending on automobiles surged, accounting for more than half of the rise in durable goods outlays.

US Treasury debt prices rose on the data while the dollar trimmed gains. Reports on employment to manufacturing and the services industries suggest the economy has rebounded after sinking in the January-March period, but the spending data indicated growth would probably fall short of expectations.

“The consumer spending number is not enough of an acceleration to give confidence to large second-quarter GDP rebound numbers,” said Alan Ruskin, global head of G10 foreign exchange strategy at Deutsche Bank.