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Consumers Purchased Cars in May, That’s It

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June 26, 2014 by   Leave a Comment

Consumers splurged on new cars and trucks in May, but not much else despite another solid month of income gains. And inflation continued its steady march higher.

MarketWatch reported that the government said consumer spending climbed 0.2% last month, driven largely by the sale of new autos. Economists polled by MarketWatch were expecting a 0.4% increase, especially after a flat reading in April.

Spending was even weaker when adjusted for inflation, falling for the second straight month amid a sharp uptick in prices since February. “Weakness in real spending is likely in part a consequence of a recent pickup in inflation,” economists at BNP Paribas wrote in a research note.

The lackluster pace of consumer demand — the engine of U.S. economic activity — spurred many forecasters to mark down their estimates for second-quarter growth. The economy is now seen expanding at a 3.6% clip in the April-to-June period, down from a prior estimate of 3.8%, according to the MarketWatch survey. And some analysts see growth failing to reach 3% in the quarter.

Personal incomes, meanwhile, rose 0.4% to mark the fifth straight gain, the Commerce Department said.

The increase in incomes in the first five months of this year is the fastest since the end of 2011 and early 2012. Over the past 12 months incomes have risen 3.5%, boosted by an upturn in hiring that’s putting more people to work and putting cash in their pockets.

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