Consumer Spending Flat in May

Consumer Spending Flat in May

Consumer spending was flat last month and dropped 0.1 percent in inflation-adjusted dollars, the Commerce Department said in a report indicating high gasoline prices and unemployment levels are slowing economic recovery.

Transportation companies keep close watch on consumer spending, which accounts for two-thirds of U.S. economic activity and drives a large portion of domestic freight and containerized imports.

The Commerce Department said after-tax personal incomes rose 0.3 percent in May for the second straight month but when adjusted for inflation rose only 0.1 percent after falling by the same amount in April.

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The small increase in personal income, coupled with flat spending levels, boosted the personal savings rate to 5 percent in May from 4.9 percent in April.

Economists said the weak numbers on spending were affected by gas prices in the $4-a-gallon range and an unemployment rate of 9.1 percent.

Bloomberg News said the median forecast of economists polled by Bloomberg News from June 1 to June 8 predicted consumer spending will grow at an average 2.95 percent annual rate in the second half of the year after rising 2.1 percent this quarter.

Gas prices have eased since peaking in early May at a national average of nearly $4 per gallon. In the past two months they have dropped to a national average of $3.57 per gallon, according to the American Automobile Association's daily fuel gauge.

-- Contact Joseph Bonney at jbonney@joc.com. Follow him on Twitter @josephbonney.