Consumer Spending Flagged in May, Inflation Rose

(CN) — The Commerce Department said Friday that consumer spending was unexpectedly sluggish in May after two months of solid gains. At the same time, inflation surged, rising at the fastest rate in six years.

For the month, the department said spending — a key measure of the economy — rose just 0.2 percent, following stronger increases of 0.6 percent in March and 0.5 percent in April.

Meanwhile inflation was up 0.2 percent in May and 2.3 percent over the past 12 months. That is the fastest 12-month pace since 2012.

Consumer spending accounts for 70 percent of economic activity. Economists had expected the spending rate in May to be much better, and in line with forecasts that economic growth is continuing to ramp up following a sluggish winter.

Before Friday’s numbers were announced., many economists had been looking for a more robust increase of around 0.5 percent in spending.

Incomes grew a solid 0.4 percent in May, supported by strong growth in wages and salaries.

With the income gain outpacing the increase in spending, the saving rate rose to 3.2 percent of after-tax incomes in May, up from 3 percent in April.

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