US Consumer Spending Falls in May by Most This Year

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Bloomberg Jun 27 21:32 · 26.2k Views

US consumer spending declined in May by the most since the start of the year as personal consumption expenditures fell 0.3% after adjusting for inflation. The Federal Reserve’s preferred inflation metric, the so-called core personal consumption expenditures price index, which excludes food and energy items, rose 0.2% from April and advanced 2.7% from a year ago. Michael McKee reports on Bloomberg Television.

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00:00 Well, a personal spending comes in negative, down a 10th of a percent.
00:03 And that's been a concern for the Fed.
00:05 Is the economy slowing because consumers are slowing.
00:08 We saw
00:09 in yesterday's GDP report that consumer spending had
00:13 fallen much more than the
00:16 government had originally reported.
00:18 Now, on the inflation side, we're pretty much exactly what
00:22 economists had forecast.
00:24 They're pretty good at the PCEA, 10th of a percent on the headline number
00:28 and
00:29 2/10 of 8% little bit
00:32 higher inflation on the core.
00:34 That puts the year over year numbers at 2.3% for the headline,
00:39 up from 2.1 percent,
00:41 2.7% from
00:43 for the for the core on a year over year basis, up from 2.5%.
00:47 So if you did want to make the case for a July cut, it gets a little bit harder now because the Fed is further away
00:54 from its 2% target.
00:55 And the other number we've got here, personal income is also a drop
00:59 down, 4/10 of 8%.
01:01 It rose 8 tenths of a percent last month.
01:03 So a lot of give back there.
01:05 The consumer is cutting back on spending, it appears, and their income, their ability to keep spending
01:11 falls in the month of May.
01:13 So not a particularly good report
01:15 for the economy overall.
01:17 The spending and income numbers make a case for the Fed may be starting to think about cutting the inflation numbers, pushing the other direction.
01:24 Mike, we mentioned to you earlier on this morning the difference between the July meeting of the September meeting for the Federal Reserve.
01:30 You might just sit there and flippantly say just a few months, but you make the point that actually they will have a very, potentially very different economic picture given they get so much more economic data.
01:39 Yeah, we get
01:40 CPI three times before the next Fed meeting.
01:43 We get two more PCE reports.
01:45 So the Fed will have a much better idea of whether tariffs are feeding into inflation.
01:50 We get the July CPI on the 5th or the June CPI on the 15th of July
01:56 and that may not capture at all either.
01:58 But what people will be looking for is specific sectors that might be seeing some inflation pressures from tariffs.
02:04 And then once we see the reciprocal tariffs and, and what's going to happen, then you can look at the July and August numbers before you get to the September 17th meeting.