(Bloomberg) – Personal spending in the United States stagnated in May, reflecting a decline in merchandise outlays, while a closely watched measure of inflation continued to rise.
Purchases of goods and services were unchanged after an upwardly revised increase of 0.9% in April, according to figures released Friday by the Commerce Department. The price indicator for personal consumption expenditures, which the Federal Reserve officially uses for its inflation target, rose 0.4%.
The median estimates from economists surveyed by Bloomberg was a 0.4% increase for expenses. While spending on services rose in May, the overall figure was reduced by the decline in goods.
Although the May figure did not meet expectations, it was offset by the April advance, higher than initially reported. Mass vaccinations and the reopening of the economy have given consumers the confidence to travel and resume many of the pre-Covid activities.
Along with high levels of savings and reduced restrictions, spending on services should approach pre-pandemic levels in the coming months.
At the same time, high demand, coupled with supply bottlenecks and capacity constraints, are driving prices higher. The spike in inflation has taken a toll on American wages, and consumers face higher prices at gas stations, restaurants and grocery stores.
The increase in the general PCE price index in May followed a 0.6% increase in the previous month. Adjusting for inflation, spending decreased 0.4% in May after rising 0.3% in April.
With retail sales hovering around record levels, consumption has started to shift into services, the bulk of the economy. Adjusted for inflation, spending on goods fell 2%, while spending on services rose 0.4%, according to the personal spending report. The decline in merchandise outlays was led by the largest drop in durable goods spending since February.
Revenue declined for a second month, falling 2% in May after rising in March when many Americans received another round of federal stimulus checks.
Concern about inflation
The basic price index, which excludes food and energy, increased 0.5% compared to the previous month. The basic indicator rose 3.4% compared to May 2020, the largest increase since 1991. The PCE price index rose 3.9% compared to the previous year.
Inflationary pressures have rebounded significantly in recent months, but year-on-year inflation metrics are distorted by so-called base effects. Due to weak inflation records at the beginning of the pandemic, annual increases in price metrics appear larger.
Economists, market participants and politicians have debated intensely whether the recent spike in inflation will be temporary or the start of a larger trend. Fed Chairman Jerome Powell acknowledged that the rise in inflation has been higher than expected, but overall, he said the rebound will be temporary.
Powell told lawmakers Tuesday that “a fairly substantial part or perhaps all of the excess inflation comes from categories that are directly affected by the reopening of the economy” and is therefore expected to dissipate over the course of the year. anus.
Original Note: US Personal Spending Stagnated in May as Prices Increased
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