Consumer spending in the U.S. rose less than forecast in May and the Federal Reserve's preferred inflation gauge cooled, a sign moderating growth is restraining price pressures.
The 0.5 percent rise in spending matched the gain in April, the Commerce Department said today in Washington. Core prices, which exclude food and fuel costs, rose at the slowest pace since March 2004 in the year ended May.
The figures may comfort Fed policy makers, who said yesterday that inflation remained their biggest concern pending more evidence of a sustained moderation in prices. Treasury securities extended their gains, with benchmark 10-year notes heading for the first back-to-back weekly advance since March.
``There has been a clear slowing in core prices the past few months, but as the Fed cautioned yesterday, it remains to be seen whether that is sustainable,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. ``Consumer spending has slowed pretty decisively in the second quarter.'' O'Sullivan correctly forecast the gain in spending.
Right now Bernanke is looking pretty damn good to the financial markets. For the last year he has been saying that core inflation would decrease as the economy slowed and it more or less has. In addition, when he came into office there was concern about his inflation fighting credentials. However, the Fed has continued to state over the last year that it's primary concern was inflation. In short, he should be gaining the markets trust right now.
