Consumer Spending Flat in May

NEW YORK (TheStreet) -- While salaries got a small boost in May, Americans haven't changed how much they spend.

The Department of Commerce reported that personal income grew by 0.3% while spending stayed unchanged for May. Income growth was about in line with expectations. However, analysts were predicting a fall in spending by 0.3%, according to Briefing.com.

Taking into account inflation, spending actually fell by 0.1% and incomes stayed about flat. The PCE price index ticked up 2.5% from one year ago.

The most recent data suggests a weakening in the consumer sector. Growing costs at grocery stores have forced consumers to spend more, but a drop in car and retail sales have put downward pressure on total spending.

In April, salaries and spending had grown by 0.4%.

In a week of thin economic data, investors are looking for any clues as to the health of the economy. A drop in spending might be bad news when spending makes up two-thirds of the U.S. economy. One could also argue that when Americans stash more away in banks, the saved money still drives economic activity through bank lending.

The good news this morning is while inflation is high, it seems to be in check. Economists disagree whether inflated prices in the U.S. stem from monetary policy or from pressures abroad.

-- Written by Chao Deng in New York.

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