The Economy

U.S. Consumer Spending Rises 0.4% in May

The latest spending report suggests consumers are once again driving economic growth after a sluggish start to 2016.
Katie Kuehner-HebertJune 29, 2016

After a sluggish start to 2016, consumer spending shows signs of bouncing back.

Personal consumption expenditures rose 0.4% in May from a month earlier, the Commerce Department said on Wednesday. Economists surveyed by The Wall Street Journal had expected personal spending to increase 0.4%.

Personal spending rose 1.1% in April and was flat in March, based on revised estimates.

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The May spending report and other data suggest that households are once again driving economic growth amid a cloudy global outlook. Consumer spending accounts for more than two-thirds of U.S. economic activity.

“The latest consumer spending figures precede the U.K.’s vote to leave the European Union, a move that roiled markets but may have only limited immediate impact on the broader U.S. economy,” the WSJ noted.

According to CNBC, economists say if post-Brexit financial turbulence persists, “that could hurt consumer confidence and cause companies to either delay or scale back capital projects, exerting further downward pressure on business investment.”

So far, economists are forecasting that Brexit will subtract an average of two-tenths of a percentage point from U.S. growth over the next six quarters.

Barclays on Wednesday raised its estimate for second-quarter GDP growth to 2.8% from 2.5%. GDP advanced at a 1.1% seasonally adjusted annual rate in the first quarter and the  Atlanta Federal Reserve is currently estimating second-quarter GDP rising at a 2.6% rate.

Consumer spending was boosted last month by a 0.3% jump in purchases of long-lasting manufactured goods such as automobiles. Spending on services increased 0.4%.

Personal income rose 0.2% in May, as wages and salaries advanced 0.2%. The personal saving rate in May was 5.3%, the lowest level of the year and well down from a near-term peak of 6% in March.

“Incomes also are slowly rising, suggesting the labor market remains stable despite disappointing employment figures out earlier this month,” the Journal said.