Instant View: May consumer spending weakest in six months

Reuters News
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Posted: Jun 29, 2012 8:53 AM

NEW YORK (Reuters) - Consumer spending was flat in May for the first time in six months as Americans eased off on vehicle purchases amid tepid wage growth, but subsiding inflation pressures should keep demand supported.

COMMENTS:

DAVID ADER, HEAD OF GOVERNMENT BOND STRATEGY AT CRT CAPITAL

"While the headline numbers were more or less as expected, some components are decidedly bond friendly like the tame 0.1 percent core PCE gain and, more importantly, the downward revision to spending in April to 0.1 percent from 0.3 percent. Combined with May's flat reading this is a soft start to the quarter and will drive down GDP forecasts as a result towards the mid-1-percent handles. Note, too, the rise in the savings rate even as disposable income gained, suggesting that lower gas prices are not generating spending confidence. Interesting.

"The bond market was under pressure in the moments before the release and are steady afterwards, i.e. holding the losses. This is about the EU summit though we're not seeing so much selling as reprising."

OMER ESINER, CHIEF ANALYST, COMMONWEALTH FOREIGN EXCHANGE, WASHINGTON

"A high-level look at the data suggests we're seeing consumer spending come off the boil a bit over the last few months. That's to be expected, given uncertainty across the board and the troubling headlines we've seen. We probably went into the second quarter with less momentum in consumer spending."

PHIL FLYNN, SENIOR MARKET ANALYST WITH PFG BEST IN CHICAGO

"The data isn't all that bullish. It suggests consumers are holding onto their wallets. It is disappointing, because if we want to bounce back people will have to feel confident to spend money. As far as income goes, this is helpful, though unemployment remains very high. There's both good and bad news, and that's why the market didn't move at all on this."

MARKET REACTION

STOCKS: U.S. stock index futures held onto sharp earlier gains.

BONDS: U.S. Treasury debt prices maintained earlier losses.

FOREX: The dollar kept its earlier losses versus the euro.

(This story has been corrected in the headline and the first paragraph to say spending was weakest in six months)