Consumer spending in the U.S. rose 0.4 percent, the smallest increase in three months, and inflation held above the Federal Reserve’s preferred range.
The rise in spending follows a 0.7 percent April gain, the Commerce Department said in Washington. Over the last three months, the increase in the department’s measure of inflation that’s favored by the Fed matched the biggest in a decade.
The report also showed incomes rose 0.4 percent, more than expected, after a 0.7 percent increase that was larger than the government reported last month. The May rise reflected a jump in proprietors’ income, while wages were unchanged from a month earlier.
The report’s price gauge tied to spending patterns and excluding food and energy costs, the Fed’s preferred measure, rose 0.2 percent in May and was up 2.1 percent from the same month last year.
The core rate was up at an annual rate of 2.9 percent over the last three months, matching the year-over-year rise in April 2004 as the biggest in a decade. Bernanke is among policy makers who have said a rate of 1 percent to 2 percent is acceptable.
The savings rate fell to minus 1.7 percent, from minus 1.6 percent in April. A negative rate suggests consumers are dipping into savings to maintain spending.
From the BEA:
Personal income increased $38.3 billion, or 0.4 percent, and disposable personal income (DPI) increased $31.6 billion, or 0.3 percent, in May, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $40.3 billion, or 0.4 percent. In April, personal income increased $76.2 billion, or 0.7 percent, DPI increased $52.4 billion, or 0.6 percent, and PCE increased $65.3 billion, or 0.7 percent, based on revised estimates.
Personal saving — DPI less personal outlays — was a negative $162.9 billion in May, compared with a negative $153.5 billion in April. Personal saving as a percentage of disposable personal income was a negative 1.7 percent in May, compared with a negative 1.6 percent in April. Negative personal saving reflects personal outlays that exceed disposable personal income. Saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or other assets, or by using savings from previous periods. For more information, see the FAQs on “Personal Saving” on BEA’s Web site.