Washington – Consumer spending, which in the United States represents more than two-thirds of the nation's economic activity, slowed down in May as inflation accelerated, the Commerce Department said Monday.
Spending by households had grown by a mere 0.3 percent in April, and most analysts had estimated a rise of 0.1 percent last month.
Consumers, affected by persistent unemployment of around 9 percent some two years after the official end of the worst economic slump in the United States since the Great Depression, faced high gasoline prices in May and a constant depreciation in home values.
Personal income increased in May by 0.3 percent for the second straight month.
Seeing that incomes rose and spending stagnated, the savings rate grew from 4.9 percent in April to 5 percent in May.
The report also shows that inflation spiked in May.
The personal consumption expenditures, or PCE, price index rose 2.5 percent from May 2010 to May 2011, compared with an increase of 2.2 percent over the 12 months ending in April 2011.
The Federal Reserve, whose job it is to control inflation, is watching closely the core PCE, excluding volatile food and energy prices, which rose 1.2 percent in the 12 months ending in May, compared with a 1.1 percent increase in the 12 months up to April.
Core PCE rose 0.3 percent last month, the biggest monthly increase since October 2009.
The growth of U.S. gross domestic product slowed down in the first quarter when the surge in fuel prices made it belt-tightening time for consumers.
In its third and final calculation of first-quarter GDP, the government said Friday that the economy grew at an annual rate of 1.9 percent (from the fourth quarter to the first quarter), up one-tenth of a percent from a previous estimate.
In the fourth quarter of 2010, GDP had grown at an annualized rate of 3.1 percent.
The Federal Reserve is now projecting that the U.S. economy will grow at a rate of between 2.7 percent and 2.9 percent this year, down from an April estimate of between 3.1 percent and 3.3 percent.