Consumer Spending in U.S. Probably Little Changed in May as Incomes Rose
Consumer spending in the U.S. was probably little changed in May for a second month as Americans used wage gains to rebuild savings, economists said before a report today.
Purchases rose 0.1 percent after no change the prior month, according to the median forecast of 58 economists surveyed by Bloomberg News. Incomes climbed 0.5 percent, the biggest increase in a year, the survey also showed.
The spending pause may not persist as gains in payrolls, longer workweeks and increasing pay are helping Americans gain confidence in the recovery. Federal Reserve policy makers last week pledged to keep interest rates low to ensure households weather the fallout from the European debt crisis, unemployment hovering near a 26-year high and tight credit.
“Consumer spending is still moving forward, but it’s not leading the recovery,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “Consumers are now depending on growth in employment income to drive spending.”
The Commerce Department’s report is due at 8:30 a.m. in Washington. Spending projections ranged from a gain of 0.3 percent to a decline of 0.5 percent.
The report will probably show inflation subsiding. The inflation gauge tied to spending patterns increased 1.8 percent from May 2009, down from 2 percent in the 12 months through April, economists forecast the report will show.
Inflation Ebbs
The Fed’s preferred price measure, which excludes food and fuel, rose 0.1 percent in May from the prior month, matching April’s increase, according to the survey.
The Fed last week said the labor market is “improving gradually,” changing April’s assessment that it was “beginning to improve.” Consumer spending still “remains constrained” by joblessness and “tight credit,” it said.
Spending cooled last month as a housing tax credit and incentives to buy energy-saving appliances ended. Sales at U.S. retailers unexpectedly dropped in May for the first time in eight months, the Commerce Department reported on June 11.
Purchases fell 1.2 percent from April, the report showed. The drop was led by a record 9.3 percent plunge in demand at building-material stores that may have reflected the end of the government incentives.
Discounters Outperform
Sales at 30 retail chains rose 2.7 percent in May from a year earlier, less than the 2.9 percent forecast, Retail Metrics said June 3. Discounters did better as Americans tried to stretch their paychecks. Sales at Costco Wholesale Corp., the largest U.S. warehouse club, rose 9 percent. Sales at BJ’s Wholesale Club Inc. climbed 6.8 percent.
“Consumers are less cautious than they were previously,” Robert Niblock, chief executive officer at Lowe’s Cos., the second-largest home-improvement chain, said in a June 23 teleconference. “But they still know that we’re still not out of the woods yet.”
Retailer shares are little changed this year after giving back earlier gains as concern over the European crisis intensified. The Standard & Poor’s Supercomposite Retailing Index climbed 0.7 percent so far this year after having been up 22 percent through April 26.
Consumer spending grew at a 3 percent annual pace in the first three months of 2010, less than previously estimated, the Commerce Department said last week. The report showed the economy grew 2.7 percent in the first quarter.
Economists surveyed this month projected purchases will expand at a 3 percent rate in the April-to-June period and 2.6 percent in the second half of the year.
Bloomberg News
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Pers Pers PCE Core PCE
Inc Spend Deflator Prices
MOM% MOM% YOY% MOM%
==============================================================
Date of Release 06/28 06/28 06/28 06/28
Observation Period May May May May
--------------------------------------------------------------
Median 0.5% 0.1% 1.8% 0.1%
Average 0.5% 0.1% 1.8% 0.1%
High Forecast 0.7% 0.3% 1.8% 0.1%
Low Forecast 0.2% -0.5% 1.7% -0.1%
Number of Participants 54 58 16 38
Previous 0.4% 0.0% 2.0% 0.1%
--------------------------------------------------------------
4CAST Ltd. 0.4% -0.1% --- ---
Action Economics 0.6% 0.2% --- 0.1%
Aletti Gestielle SGR 0.4% 0.0% 1.8% 0.0%
Ameriprise Financial Inc 0.3% 0.1% 1.8% 0.1%
Banesto 0.5% 0.1% --- ---
Bank of Tokyo- Mitsubishi 0.7% 0.1% --- 0.1%
Bantleon Bank AG 0.5% 0.1% --- 0.1%
Barclays Capital 0.4% 0.2% 1.8% 0.1%
Bayerische Landesbank 0.5% 0.1% --- ---
BMO Capital Markets 0.6% 0.2% --- 0.1%
C I T I C Securities 0.3% 0.2% --- ---
Capital Economics 0.6% -0.3% 1.7% 0.1%
CIBC World Markets 0.6% 0.3% --- ---
ClearView Economics 0.6% 0.2% --- 0.1%
Commerzbank AG 0.5% 0.2% --- 0.1%
Credit Agricole CIB 0.5% 0.2% --- 0.1%
Credit Suisse 0.6% 0.3% 1.7% 0.1%
DekaBank 0.6% 0.1% --- ---
Desjardins Group 0.3% 0.3% 1.8% 0.1%
Deutsche Bank Securities 0.4% 0.2% --- 0.1%
Deutsche Postbank AG --- 0.1% --- ---
DZ Bank 0.4% -0.1% --- 0.1%
First Trust Advisors 0.3% 0.1% --- ---
Fortis --- 0.0% --- ---
Helaba 0.5% 0.2% 1.8% 0.1%
IDEAglobal 0.6% 0.2% 1.8% 0.1%
Informa Global Markets 0.4% 0.1% --- ---
ING Financial Markets 0.4% 0.2% 1.7% 0.0%
Insight Economics 0.5% 0.3% --- 0.1%
Intesa-SanPaulo 0.5% 0.0% --- 0.1%
Janney Montgomery Scott L 0.2% -0.2% 1.8% 0.0%
Jefferies & Co. 0.2% 0.2% --- ---
Landesbank Berlin 0.6% -0.2% --- ---
Landesbank BW 0.6% 0.3% 1.7% ---
Maria Fiorini Ramirez Inc 0.4% 0.1% --- 0.1%
Moody’s Economy.com 0.4% 0.3% --- 0.1%
Morgan Keegan & Co. 0.5% -0.5% --- ---
Morgan Stanley & Co. 0.5% 0.1% --- ---
Natixis 0.3% 0.1% 1.8% 0.1%
Nomura Securities Intl. 0.3% 0.3% --- 0.1%
Nord/LB 0.4% 0.0% --- 0.1%
Pierpont Securities LLC 0.6% 0.2% --- 0.1%
PNC Bank 0.5% 0.0% --- ---
Raiffeisen Zentralbank 0.3% 0.0% --- 0.1%
Raymond James 0.5% 0.2% --- 0.1%
RBC Capital Markets 0.6% 0.1% 1.8% 0.1%
Ried, Thunberg & Co. --- 0.2% 1.8% 0.1%
Societe Generale 0.5% 0.1% --- ---
Standard Chartered 0.5% 0.1% --- ---
State Street Global Marke 0.5% 0.1% 1.8% 0.1%
Stone & McCarthy Research 0.4% -0.2% --- ---
Union Investment 0.4% 0.2% --- ---
University of Maryland 0.5% 0.2% --- 0.1%
Wells Fargo & Co. 0.3% 0.0% 1.8% -0.1%
WestLB AG 0.5% 0.2% --- 0.1%
Westpac Banking Co. 0.5% -0.1% --- 0.0%
Woodley Park Research 0.6% 0.1% --- 0.1%
Wrightson Associates --- 0.2% --- 0.1%
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To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
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