News / Economy

US Consumer Spending Rises Modestly, Jobless Claims Fall

FILE - FedEx Packages move on a conveyor belt at the FedEx hub at Los Angeles International Airport in Los Angeles.
FILE - FedEx Packages move on a conveyor belt at the FedEx hub at Los Angeles International Airport in Los Angeles.
Reuters

U.S. consumer spending rose less than expected in May, likely held back by weak healthcare spending, which could prompt economists to temper their second-quarter growth estimates.

The Commerce Department said on Thursday consumer spending increased 0.2 percent after being flat in April. Spending, which accounts for more than two-thirds of U.S. economic activity, had been forecast rising 0.4 percent.

When adjusted for inflation, consumer spending fell for a second straight month, suggesting spending this quarter could struggle to regain momentum after growing at its slowest pace in nearly five years in the first quarter.

Healthcare spending

Spending in May was probably constrained by weak healthcare spending as outlays on services barely rose for a second month. Spending on automobiles surged, accounting for more than half of the rise in durable goods outlays.

U.S. Treasury debt prices rose on the data while the dollar trimmed gains.

Reports on employment to manufacturing and the services industries suggest the economy has rebounded after sinking in the January-March period, but the spending data indicated that growth would probably fall short of expectations.

“The consumer spending number is not enough of an acceleration to give confidence to large second-quarter GDP rebound numbers,” said Alan Ruskin, global head of G10 foreign exchange strategy at Deutsche Bank in New York.

Second-quarter growth estimates have ranged as high as a 4.0 percent annual pace. The economy contracted at a 2.9 percent pace in the first quarter, the worst performance in five years.

In a separate report, the Labor Department said new applications for state unemployment benefits slipped 2,000 to a seasonally adjusted 312,000 for the week ended June 21.

The declining claims suggest a recent streak of payroll job gains above 200,000, is likely to be sustained, lending the economy enough momentum for inflation to start perking up.

Inflation ticking up

A price index for consumer spending increased 0.2 percent in May, rising by the same margin for a third consecutive month.

In the 12 months through May, the personal consumption expenditures (PCE) price index was up 1.8 percent, the largest gain since October 2012. It had advanced 1.6 percent April and should comfort Federal Reserve officials concerned about price pressures being too low.

Excluding food and energy, prices also posted a 0.2 percent gain. That followed a similar increase in April. The so-called core PCE price index increased 1.5 percent from a year ago.

That was the biggest increase since February last year and followed a 1.4 percent rise in April.

Both inflation measures still remain below the Fed's 2 percent inflation target.

Inflation, which has been depressed by weak medical care costs and sluggish wage growth, is being watched for clues on the timing of the central bank's first interest rate hike.

The Fed, which is scaling back the amount of money it is pumping into the economy through monthly bond purchases, has kept its benchmark lending rate near zero since December 2008.

You May Like

Mali's Female Basketball Players Rebound After Islamist Occupation

Islamist extremists ruled northern Mali for most of 2012, imposing strict Sharia law, and now some 18 months later, the region is slowly getting back on its feet More

Video Vietnamese Staging Chinese Product Boycott After Oil Rig Spat

Many Chinese-made products go unsold, for now, with numerous Vietnamese consumers still angry over recent dispute More

Koreas Mark 61st Anniversary of War Armistice

Muted observances on both sides of heavily-armed Demilitarized Zone that separates two decades-long enemies More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Students in Business for Themselvesi
X
Mike O'Sullivan
July 26, 2014 11:04 AM
They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Students in Business for Themselves

They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.
Video

Video Not Even Monks Spared From Thailand’s Junta-Backed Morality Push

With Thailand’s military government firmly in control after May’s bloodless coup, authorities are carrying out plans they say are aimed at restoring discipline, morality and patriotism to all Thais. The measures include a crackdown on illegal gambling, education reforms to promote students’ moral development, and a new 24-hour phone hotline for citizens to report misbehaving monks. Steve Sandford reports from Bangkok.
Video

Video Virtual Program Teaches Farming Skills

In a fast-changing world beset by unpredictable climate conditions, farmers cannot afford to ignore new technology. Researchers in Australia are developing an online virtual world program to share information about climate change and more sustainable farming techniques for sugar cane growers. As VOA's Zlatica Hoke reports, the idea is to create a wider support network for farmers.
Video

Video Airline Expert: Missile will Show Signature on Debris

The debris field from Malaysia Airlines Flight 17 is spread over a 21-kilometer radius in eastern Ukraine. It is expected to take investigators months to sort through the airplane pieces to learn about the missile that brought down the jetliner and who fired it. VOAs Carolyn Presutti explains how this work will be done.
Video

Video Treatment for Childhood Epilepsy Heats up Medical Marijuana Debate

In the United States, marijuana is classed as an illegal drug by the federal government. But nearly half the states have legalized it, to some degree. Proponents say some strains of marijuana might have exceptional health benefits, for treating pain or inflammation in chronic conditions such as cancer, multiple sclerosis and epilepsy. Shelley Schlender reports on a strain of medical marijuana developed in Colorado that is reputed to reduce seizures in childhood epilepsy
Video

Video Airbus Adds Metal 3D Printed Parts to New Jets

By the end of this year, European aircraft manufacturing consortium Airbus plans to deliver the first of its new, extra-wide-body passenger jets, the A350-XWB. Among other technological innovations, the new plane will also incorporate metal parts made in a 3-D printer. VOA's George Putic has more.
Video

Video AIDS Conference Welcomes Exciting Developments in HIV Treatment, Prevention

Significant strides have been made in recent years toward the treatment and prevention of HIV, the virus that causes AIDS. This year, at the International AIDS Conference, the AIDS community welcomed progress on a new pill that may prevent transmission of the deadly virus. VOA’s Anita Powell reports from Melbourne, Australia.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.

AppleAndroid

World Currencies

EUR
USD
0.7305
JPY
USD
101.53
GBP
USD
0.5830
CAD
USD
1.0656
INR
USD
60.075

Rates may not be current.