Sometimes, I just wonder whether Bloomberg is doing this to create a hook for bloggers to write about their economic reports, emphasis mine:
Consumer spending unexpectedly stagnated in May as employment prospects dimmed and rising inflation caused Americans to cut back.
Purchases were little changed, the weakest outcome since June 2010, after a revised 0.3 percent gain the prior month that was smaller than previously estimated, Commerce Department figures showed today inWashington. The median estimate of economists surveyed by Bloomberg News called for a 0.1 percent gain. Prices excluding food and energy rose more than forecast.
This time, don’t blame Reuters. They avoided the U word and all of its forms in reporting the downturn in consumer spending, although they too expected a 0.1% gain in spending. Reuters noted that the trend will almost certainly pull down growth numbers:
When adjusted for inflation, spending slipped 0.1 percent, the Commerce Department said on Monday, falling for a second straight month.
The report, which showed underlying inflation quickening, suggested that consumer spending would offer little support to the economy in the second quarter. In the first three months of the year, it advanced at a modest 2.2 percent annual rate.
Consumer spending, which accounts for 70 percent of U.S. economic activity, rose 0.3 percent in April and economists had expected a gain of 0.1 percent last month.
They quote an economist as saying that the slowing activity among consumers will shave “a couple of tenths of a point” from Q2’s eventual GDP growth number. Since Commerce just rated Q1’s final GDP number at an anemic 1.9%, there isn’t much room for any more reductions before we fall back into negative growth again. Inventory management in that Q1 figure accounted for most of the growth, with real final sales of domestic product stuck at 0.6% annualized growth rate in Q1.
We are just a few days from closing the quarter. Based on reports from the first two months and no evidence of traction in the job market, I’d guess that Q2 will come in at 0% or slightly under. Unless June turned into some kind of blockbuster, it’s at least going to finish well below Q1.