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

Video Miami Cubans Divided on New US Policy

While older, more conservative Cuban Americans have promoted anti-Castro political movement for years, younger generations say economically, it is time for change More

2014 Sees Dramatic Uptick in Boko Haram Abductions

Militants suspected in latest mass kidnapping of over 100 people in Gumsuri, Nigeria on Sunday More

Video Cuba Deal Is Major Victory for Pope

Role of Francis hailed throughout US, Latin America - though some Cuban-American Catholics have mixed feelings More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Sudan School Becomes Target of Aerial Attacksi
X
December 19, 2014 12:45 AM
The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Putin Says Russian Economy Will Emerge Stronger

Russian President Vladimir Putin has said his country's sinking economy will not only recover but also become stronger, despite falling oil prices and Western sanctions over Ukraine. VOA's Daniel Schearf reports.
Video

Video Detained Turkish Journalists Follow Teachings of US-Based Preacher

The Turkish government’s jailing of critical journalists has sparked international condemnation and is being seen as an effort to undermine the followers of an ailing Turkish preacher based in the United States. VOA religion reporter Jerome Socolovsky has more.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8143
JPY
USD
119.23
GBP
USD
0.6390
CAD
USD
1.1596
INR
USD
63.304

Rates may not be current.