Spending by Consumers Leveled Off During May

Personal spending was flat in May, the government said Friday in a report indicating growing caution among consumers who have been a major source of strength for the economy during seven years of growth.

“The consumer clearly has pulled back in a dramatic fashion,” said Stephen S. Roach, senior economist with Morgan Stanley & Co. in New York.

The Commerce Department said consumer spending remained unchanged at a seasonally adjusted annual rate of $3.66 trillion after seven straight months of gains, including 0.5% in April and 0.3% in March.

But even the April and March advances were weaker than first thought. They were revised downward from 0.6% and 0.5% reported last month.

Consumer spending is considered a barometer of economic health since it accounts for about two-thirds of the nation’s economic activity.

In another measure of economic vitality, the Commerce Department said purchases of durable goods fell $12.6 billion after an $8.5-billion gain in April. Durable goods purchases had declined the previous two months.

Purchases of non-durable goods were down $500 million in May, their third consecutive declineAnalysts have cited a poor job market and weak wage increases for flagging consumer purchases.

Indeed, the Commerce Department said personal incomes rose just 0.3% in May for a second straight month, to a seasonally adjusted annual rate of $4.70 trillion. The identical gains followed three consecutive monthly advances of 0.8% and were the lowest since a 0.2% increase last September.