The engine of the U.S. economy, consumer spending, was flat in May, while inflation continued to rise.
U.S. consumers maintained a rapid spending rate in May, but revenues and savings fell as the large amount of earnings related to the government pandemic faded and some states withdrew from federal benefit programs. for unemployment.
Personal consumption expenditure (PCE), a measure of consumer spending, did not change in May from the previous month, the U.S. Bureau of Economic Analysis (BEA) said Friday, as an increase in spending on services was offset by a decline in spending on goods.
Adjusted for inflation, the PCE fell 0.4 percent last month from April.
The PCE is a closely monitored indicator because consumer spending drives about two-thirds of U.S. economic growth. After rising sharply in March and continuing to rise in April, spending reached cruising altitude in May.
The plateau reflects “a decline in government social benefits,” the BEA said in a press release, as less stimulus checks were dropped on U.S. bank accounts last month and some states chose not to participate in federal unemployment benefit programs.
The $ 300 federal weekly surcharge for state unemployment benefits has become political football in the United States as companies across the country struggle to find workers, even as millions of Americans remain unemployed .
Some Republicans argue that the federal surcharge is discouraging unemployed workers from finding work.
Some 26 U.S. states have said they are pulling out federal pandemic unemployment assistance programs, which includes the federal weekly recharge.
But economists point to another reason that may be keeping workers on the sidelines, from early retirements and the lack of childcare options during the pandemic, to the fear of hiring COVID-19. Job bottlenecks as companies reopen and increase at the same time can also contribute to the disconnect between the number of unemployed and the number of jobs to be filled.
The declining government stimulus was reflected in personal income in May, which fell 2% over the previous month. Disposable income was more successful, falling 2.3%.
Meanwhile, inflation continues to march upwards as supply chain bottlenecks as a result of pandemic restriction restitutions raise commodity prices and weigh on firms trying to expand operations.
The PCE price index, which is the Federal Reserve’s preferred measure of inflation, rose 0.4 percent last month. Excluding food and energy, it rose 0.5 percent.
Rising prices especially affect less affluent households because they eat a larger share of their income.
For now, however, the superintendent of the world’s largest economy, the Federal Reserve, prioritizes Americans returning to work above inflation issues.
Fed chief Jerome Powell has repeatedly said the current rise in inflation is likely to be temporary and that the Fed has no plans to raise interest rates until the nation’s labor market is healed.