The consumer spending in US grew less than what was estimated in May, inhibiting the intensity of the predicted rebound in the economic growth of the country for this quarter.
Today, the Commerce Department of US reported in Washington that purchases, which make up around 70% of the economy, increased 0.2% in May, after being changed a little in April. It was also revealed in the report that the US people saved more money for future uses, as both inflation as well as incomes picked up.
While on one side, some households are pleased with gains in equities and employment, on the other hand, the increased prices at grocery stores as well as at service stations are affecting the budgets pretty badly. The consumers will probably remain cautious until the gains in wages is substantially big to compensate for the increasing food and fuel bills.
Nariman Behravesh, the chief economist at IHS, in Lexington, Massachusetts, perfectly estimated the gain in spending. He said, “Clearly the consumer is getting a bit squeezed here. The second quarter could come in a little lower.”
Moreover, a fall in the stocks was observed now for the third time in last four days, courtesy the disappointing spending figures and as James Bullard, the President of Federal Reserve Bank of St. Louis, announced that the interest rates might increase in March. Also, the Standard & Poor’s 500 Index decreased by 0.1% to close at 1,957.22 in New York, with US trade deficit of April extending to USD 47.2 Billion.
In a Bloomberg survey, the average estimate of 76 economists called for an increase of 0.4% in spending. The projections ranged from gains of 0.1% to 0.6%. The reading of the previous month was originally reported as a decrease of 0.1%.