Consumer spending for May weakest in 6 months

More signs that the economy is slowing; consumer spending tanked in May, the worst showing in six months.

Bloomberg:

Consumer spending in the U.S. stalled in May as slower job gains and a lack of wage growth prompted Americans to cut back.

Purchases were unchanged, the weakest since November, after a 0.1 percent rise the prior month that was smaller than initially reported, Commerce Department figures showed today in Washington. The median estimate of 75 economists surveyed by Bloomberg News called for no change in so-called nominal sales.

Merchants from CarMax Inc. (KMX) to Red Robin Gourmet Burgers Inc. (RRGB) are feeling the pinch of restrained household incomes as the jobless rate exceeds 8 percent for 40 straight months. While gasoline prices are less of a burden on Americans, the absence of bigger employment gains will make it tough for spending and the expansion to accelerate.

"Consumers are struggling with a lack of income growth, and the consequence is spending is suffering," said Ward McCarthy, chief financial economist at Jefferies & Co. in New York, who forecast stagnant spending. "The decline in gasoline prices, especially if it continues, will provide some relief going forward, but income growth is the impediment right now."

Projections for spending ranged from declines of 0.3 percent to increases of 0.3 percent. The Commerce Department revised the April spending figure from a previously reported 0.3 percent gain.

The psychology of the consumer is tricky. What really drives the economy forward is spending on big ticket items like appliances, cars, and vacations. But when consumers are fearful or uncomfortable, they retrench and put off making those purchases. The only thing that will really change that dynamic is a larger buffer between what money is coming in and what's going out  every month. In short, rising wages or more purchasing power. The latter is harder so until wages start climbing again, we will likely not see the kind of consumer spending that could lift us out of the doldrums.



More signs that the economy is slowing; consumer spending tanked in May, the worst showing in six months.

Bloomberg:

Consumer spending in the U.S. stalled in May as slower job gains and a lack of wage growth prompted Americans to cut back.

Purchases were unchanged, the weakest since November, after a 0.1 percent rise the prior month that was smaller than initially reported, Commerce Department figures showed today in Washington. The median estimate of 75 economists surveyed by Bloomberg News called for no change in so-called nominal sales.

Merchants from CarMax Inc. (KMX) to Red Robin Gourmet Burgers Inc. (RRGB) are feeling the pinch of restrained household incomes as the jobless rate exceeds 8 percent for 40 straight months. While gasoline prices are less of a burden on Americans, the absence of bigger employment gains will make it tough for spending and the expansion to accelerate.

"Consumers are struggling with a lack of income growth, and the consequence is spending is suffering," said Ward McCarthy, chief financial economist at Jefferies & Co. in New York, who forecast stagnant spending. "The decline in gasoline prices, especially if it continues, will provide some relief going forward, but income growth is the impediment right now."

Projections for spending ranged from declines of 0.3 percent to increases of 0.3 percent. The Commerce Department revised the April spending figure from a previously reported 0.3 percent gain.

The psychology of the consumer is tricky. What really drives the economy forward is spending on big ticket items like appliances, cars, and vacations. But when consumers are fearful or uncomfortable, they retrench and put off making those purchases. The only thing that will really change that dynamic is a larger buffer between what money is coming in and what's going out  every month. In short, rising wages or more purchasing power. The latter is harder so until wages start climbing again, we will likely not see the kind of consumer spending that could lift us out of the doldrums.



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