US personal spending and income held up in May. Reuters reports:
U.S. consumer spending jumped last month as government stimulus checks boosted household budgets and pushed the saving rate to a 13-year high...
Commerce Department data showed U.S. personal spending rose by a greater-than-expected 0.8 percent in May...
Disposable income jumped 5.7 percent in May, the biggest increase since May 1975, thanks in large part to the stimulus checks. The Commerce Department said that without that boost disposable personal income would have been up 0.4 percent.
Inflation accelerated or stayed low depending on which measure you consider important.
The overall price index for consumer spending rose 0.4 percent in May after a 0.2 percent gain the month before.
Excluding volatile food and energy prices, the core price index, which is the Fed's preferred measure of inflation, edged up by 0.1 percent. This compared with a forecast for a 0.2 percent rise, after a 0.1 percent April increase.
Consumers don't ignore food and energy though, which is probably why consumer sentiment weakened in June.
... [T]he Reuters/University of Michigan Surveys of Consumers...hit another 28-year low in June of 56.4 from May's 59.8 reading...
The Reuters/University of Michigan Surveys of Consumers...showed five-year inflation expectations remained steady at the peak of 3.4 percent reached in May, which was the highest in 13 years.
The consumer sentiment findings may be significant. Mark Thoma points us to a study by the San Francisco Fed that shows that "the forecasting contributions of consumer attitudes seem stronger when the economy is weaker", as is the case now.
Meanwhile, confidence has been falling in Europe too. Bloomberg reports:
European confidence dropped more than economists forecast this month and retail sales plunged, signaling that economic growth is continuing to cool as the region's central bank prepares to lift interest rates to a seven-year high to tackle inflation.
An index measuring sentiment in the euro area fell to 94.9, the lowest since May 2005, from 97.6 the previous month, the European Commission in Brussels said today...
The Bloomberg retail index, based on a survey of more than 1,000 executives by Markit Economics, dropped to 44 this month from 53.1 in May...
Separate figures today showed France's economy expanded less than initially estimated in the first quarter as household spending, the driving force of growth, stagnated.
And with inflation still accelerating in countries like Germany, the ECB has no room to ease to respond to the growing weakness in the economy.
To complete the rather gloomy statistics from yesterday, Bloomberg also gives us the reports from Japan.
Japan's household spending slumped in May, the ratio of jobs available fell to a three-year low and the inflation rate almost doubled, signaling that the economy's longest postwar expansion may be over.
Household spending declined 3.2 percent, the most since September 2006, the statistics bureau said today. Core consumer prices, which exclude fruit, fish and vegetables, rose 1.5 percent from a year earlier after climbing 0.9 percent in April...
The government downgraded its assessment of industrial production even after a report today showed output rose 2.9 percent in May from April, the first increase in three months. Production is showing signs of weakness because of higher energy costs and weakening global demand, the Trade Ministry said...
Retail sales rose 0.2 percent in May from a year earlier, a separate report showed today, prompting the government to cut its assessment for the first time since January 2007, describing sales as "flat."
Prices of daily necessities are climbing faster than wages, causing consumer sentiment to plunge to a six-year low in May. The ratio of jobs for each applicant slid to 0.92, the Labor Ministry said today. The unemployment rate stayed at 4 percent.
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