Americans reined in their spending last month

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"U.S. Consumer Spending Declines for First Time Since January Amid Inflation Concerns"

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Original Article Source: https://edition.cnn.com/2025/06/27/economy/us-pce-consumer-spending-inflation-may
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TruthLens AI Summary

In May, the U.S. economy experienced a notable slowdown in consumer spending for the first time since January, as reported by the Commerce Department. The data revealed a 0.1% decline in consumer spending, following a 0.2% increase in April. A significant factor contributing to this downturn was a nearly 50% drop in car sales, which had surged in the preceding months as consumers rushed to make purchases ahead of anticipated price hikes due to tariffs proposed by the Trump administration. Additionally, spending decreased at restaurants and hotels, indicating a broader pullback in discretionary expenditures by consumers. This decline in spending raises concerns about the sustainability of economic growth, particularly as inflationary pressures appear to be rising concurrently.

The report also highlighted that the Personal Consumption Expenditures (PCE) price index increased to 2.3% for the 12 months ending in May, up from 2.2% in April. On a monthly basis, prices remained stable, rising by 0.1%, which matched the previous month's increase. Economists had predicted this uptick in the PCE price index and had forecasted a slight increase in consumer spending to 0.3%. Furthermore, when excluding the more volatile categories of food and energy, the core PCE price index rose by 0.2% from April, reaching an annual rate of 2.7%. These indicators suggest that while inflation is persisting, consumer confidence may be wavering, prompting a reevaluation of spending habits in the face of economic uncertainties. The situation will continue to be monitored as further developments unfold.

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Source URL: https://edition.cnn.com/2025/06/27/economy/us-pce-consumer-spending-inflation-may

The US economic engine sputtered in May: Consumer spending slowed for the first time since January, according to new data released Friday that also showed inflation heated up on an annual basis.

Friday’s report from the Commerce Department showed that consumer spending fell 0.1% last month after rising 0.2% in April.

A nearly 50% drop-off in car sales was a significant driver of the May spending retreat — consumers rushed to dealerships to buy cars in March and April, fearing that President Donald Trump’s tariffs would send those costs soaring.

Friday’s report also showed that consumers also pulled back on spending at restaurants and hotels.

The Personal Consumption Expenditures price index was 2.3% for the 12 months ended in May, versus 2.2% in April. On a monthly basis, prices rose 0.1%, unchanged fromApril.

Economists were expecting the PCE price index to rise 0.1% from April, resulting in the annual rate ticking up to 2.3%. They expected spending to pick up slightly to 0.3%, according to FactSet.

Excluding the volatile food and energy categories, the core PCE price index rose 0.2% from April and ticked up to 2.7% on an annual basis.

This story is developing and will be updated.

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Source: CNN