Personal income and personal spending both grew by 0.2% in April, matching consensus estimates. Core inflation for May came in at 0.1%, decelerating from the 0.2% rate in April and meeting consensus.
Both income and consumption were down from March figures of 0.4%, adding fuel to the theory that one of the biggest components of the economy–consumer spending–is running out of steam. Bloomberg:
Higher fuel costs, smaller wage gains and lower home values have shaken Americans’ confidence, raising the odds that spending will keep slowing. Government tax rebates may only provide a temporary boost to economic growth in coming months.
“Consumers are spending cautiously,” said Michael Moran, chief economist at Daiwa Securities America Inc. in New York, who correctly forecast the gain in spending. “We have a slow pace of economic activity. The economy is in a grey area between recession and slow growth. We had a weak performance in wages, which is not surprising given what is happening in the labour market.”