WASHINGTON – U.S. consumer spending inched ahead in May, a slowdown from prior months that still suggests steady growth in a key segment of the economy.
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Personal consumption expenditures, a measure of household spending on everything from new cars to medical care, increased a seasonally adjusted 0.1% in May from the prior month, the Commerce Department said Friday.
Economists surveyed by The Wall Street Journal expected the 0.1% rise. The measure had risen 0.4% the prior two months.
Personal income, a measure that includes wages and government assistance, climbed 0.4% from April. Economists had forecast a 0.3% rise.
The personal-saving rate was 5.5% in May, the highest level in eight months.
Friday's report also showed the Federal Reserve's preferred measure of inflation, the price index for personal consumption expenditures, fell 0.1% in May from the prior month. Excluding the often-volatile categories of food and energy, so-called core prices were up 0.1% in May.
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Inflation continued to slip last month on an annual basis. Overall prices rose 1.4% in May from a year earlier, down from 1.7% in April and the lowest level in six months. Core prices were also up 1.4% on the year in May, the lowest level since December 2015.
The Fed, tasked with promoting stable prices, targets a 2% annual inflation rate. The price index poked above that threshold in February for the first time in nearly five years but has since settled lower.
Despite soft readings, the Fed's policy-making committee earlier this month decided to raise its benchmark interest rate by a quarter percentage point and penciled in one more increase for later this year.
"With employment near its maximum sustainable level and the labor market continuing to strengthen, the committee still expects inflation to move up and stabilize around 2% over the next couple of years," Fed Chairwoman Janet Yellen said.
Not all Fed officials agree with that assessment. Earlier this week, St. Louis Fed president James Bullard said policy makers don't need to continue steadily raising rates amid modest economic growth and tame prices.
"Low unemployment readings are probably not an indicator of meaningfully higher inflation over the forecast horizon," Mr. Bullard said Thursday.
Outside of inflation, the economy appears to be steadily advancing.
Consumer spending slowed early in the year but picked up in March and April, and remains a key driver of overall growth amid continued job gains and rising incomes.
Prior to Friday's consumer spending data, forecasting firm Macroeconomic Advisers estimated that gross domestic product was on track to expand at a 3.3% seasonally and inflation-adjusted annual rate in the second quarter, up from the first quarter's 1.4%.
In May, Americans trimmed their spending on goods--possibly reflecting a slowdown in auto purchases and cheaper gasoline prices--and increased spending on services, Commerce said.
The Commerce Department's report on personal income and spending can be accessed at: https://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm
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(END) Dow Jones Newswires
June 30, 2017 08:45 ET (12:45 GMT)