US consumer spending slows, core inflation steadies

US consumer spending rose in May at its slowest pace of the year, a sign Americans are reining in spending amid surging inflation, even as a measure of core inflation suggests price gains may be stabilizing.

Household spending, as measured by the personal consumption expenditure (PCE) report, rose by 0.2pc in May after a 0.6pc gain in April and a 1.2pc increase in March, according to the US Bureau of Economic Analysis. Adjusted for changes in prices, spending fell by 0.4pc following two months of 0.3pc gains.

Consumers are slowing the pace of purchases as inflation has surged to four-decade highs amid snarled supply chains and spiking energy costs prompted in part by the war in Ukraine. The Federal Reserve has reversed its easy money policies and embarked on its steepest pace of rate hikes in decades, saying it would rather risk recession than long-term high inflation.

The PCE price index rose by 0.6pc in May following a 0.2pc gain the prior month. Core PCE, stripping out food and energy, rose by 0.3pc for a fourth month, and was up by 4.7pc over the prior 12 months, slowing from 5.3pc in February.

The headline PCE price index rose by 6.3pc over the 12-month period through May, reflecting 36pc gains in energy prices and 11pc gains in food prices. That headline annual rate was down from 6.6pc in March.

The PCE price index is the inflation measure most closely followed by the Federal Reserve for purposes of its long-term inflation goals of 2pc, while the consumer price index (CPI), released by the Labor Department usually two to three weeks before the PCE report, is more widely watched by the public. The CPI number came in at 8.6pc annualized for May. PCE places a lower weight on gasoline and shelter than CPI.

By Robert Willis