U.S. Consumer Spending Flat in May

June 27, 2011
Analyst: 'It looks like a nasty stagflationary brew to us.'

U.S. consumers held their wallets tightly in May, spending no more than they did a month earlier in another sign of the country's limping economy, Commerce Department figures showed Monday.

With higher prices eating into wages and the job market weak, Americans spent $4.6 billion more than in April, a rise of less than 0.1%. With inflation calculated in, it was a 0.1% drop.

And while personal incomes rose 0.3%, inflation-adjusted income was up only 0.1%.

A key driver of the U.S. economy, consumer spending is closely watched as a barometer of economic growth.

But higher prices for food and especially fuel have been sapping any surplus strength in shoppers' pocketbooks -- the headline inflation rate has been running close to 4% in the second quarter.

Due to the impact of higher prices, indeed, incomes have hardly budged since the beginning of the year.

High Frequency Economics economist Ian Shepherdson blamed the slow spending on the rise in gasoline prices, which helped to put a big dent in automobile sales.

"Even with a rebound in June, (second-quarter) spending is set for less than 1%. But (Quarter 3) will be better, with gas prices falling," he predicted.

But others say the malaise is deeper.

"The first half of the year looks like real growth of 2%, inflation at 4%, and a 9% unemployment rate," said RDQ Economics. "It looks like a nasty stagflationary brew to us."

Copyright Agence France-Presse, 2011

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