For the first time this year, consumers withdrew the expenses as a bad mood, which has been omnipresent since then, since the tariffs were hit with the retail data.
The total expenses in May fell by 0.1% compared to the previous month and the income fell by 0.4%, the trade department reported Friday. According to a report that shrinked more than expected in the first quarter, the data show a rapidly dilapidated economy.
“Personal consumption expenditure is weak and continue to weaken,” Eugenio Aleman, chief economist at Raymond James, told Assets.
“We knew that the demand from consumers was on the weak side, but yesterday we had the revision of GDP in the first quarter, which confirmed that consumption was not so strong. Today’s number only confirmed that this was not even one -time.”
Both spending and income figures were distorted by one-off changes. The expenses for cars plunged and pulled back the total editions because the Americans were pulled faster to buy vehicles in spring to be ahead of the tariffs. However, the expenses for flight prices, meals and hotels fell last month – the underlying consumer pressure instead of only temporal shifts. The total expenditure for services overall increased by 0.1%in May, with the lowest increase in one -month four and a half years.
“Since consumers are not sufficient to cope with them (higher prices), they give less for relaxation, travel, hotels and this kind of things,” said Luke Tilley, chief economist at Wilmington Trust.
According to a separate report, retail sales decreased significantly last month in the last month and has completed 0.9% Last week.
The income also decreased after a one -time adjustment of social security benefits, which increased the payments in March and April, so that some pensioners who had worked for state and local governments receive higher social security payments.
Inflation heated up slightly, with prices increased in May with an annual rate of 2.3%, compared to 2.1% in April. The core prices that exclude the volatile food and energy costs rose by 2.7% compared to 2.6% in April compared to the previous year.
In the first three months of this year, consumer expenses rose only by 0.5% and were sluggish in the first two months of the second quarter. Most economists believe that the characters of May come a dramatic downshift. “The US economy is ready for a summer waste”, ” Icing Economists wrote. “It is expected that both consumer expenditure and business investments will be slowed down significantly.”
In recent years, consumers have been able to further spend on the growth of the real income and an increase in some state advantages. “But these two supports are now mostly faded, and the image of real income is quickly deteriorated because the tariffs increase prices,” said economist at Pantheon Macroeconomics. Since the personal savings are low and the consumers are too skiing to borrow, consumption will probably be much further and soon, ”they said.
Real income will flatten out this year, partly due to a weaker job market, but also because prices rise, she wrote. At the same time, the inflation rate – 2.7% per year – is significantly higher than the 2% goal of the Federal Reserve, which means that the reduction in installments will no longer come.
“With so many uncertainties that are still present, the FED will retain interest rates for the time being,” said Oren Klachkin, Economist Financial Markets, the economist of the financial markets.
