US consumer spending flat in May, income nudges up


The Commerce Department said Friday that consumer spending showed no gain in May. That's the weakest figure since spending was unchanged in November.

Income growth edged up 0.2 percent, matching April's increase which also was the worst since November.

Still, after deducting taxes and adjusting for inflation, income rose 0.3 percent. It's the biggest monthly increase for that category in two years, although it largely reflects the sharp drop in gas prices that has lowered inflation.

Consumer spending on autos and other durable goods fell 0.4 percent. Spending on non-durable goods dropped 0.8 percent, mostly because of the lower gas prices.

Job growth has tumbled in the past two months. Americans' wages are struggling to keep pace with inflation. And growth in manufacturing has slowed, in part because Europe's financial crisis has dampened demand for U.S. exports.

Most economists don't see growth accelerating much from the first-quarter dismal 1.9 percent annual pace. Still, some are hopeful that lower gas prices could lead consumers to spend more this summer.

Consumer spending drives roughly 70 percent of economic activity.

Gas prices have fallen sharply since peaking in early April at a national average near $4 per gallon. The nationwide average for a gallon of regular was $3.37 on Thursday, according to AAA's daily fuel gauge report.

If gas prices stay low, Americans are likely to spend more freely this summer on other goods, from autos and furniture to electronics and vacations, that fuel economic growth. Gasoline purchases tend to provide less benefit for the U.S. economy because some of the money goes to oil-exporting nations.

Consumer confidence fell in June for the fourth straight month, according to a closely watched survey from the Conference Board. Worries about the job market have outweighed the benefits of cheaper gas and a gradually improving housing market.

Employers added an average of only 73,000 jobs a month in April and May. The followed three months when the economy created an average 226,000 jobs a month.

The weak job market was a key reason the Federal Reserve last week downgraded its outlook for growth this year. It now expects growth of between 1.9 percent and 2.4 percent in 2012 -- half a percentage point lower than its April forecast.

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