U.S. consumer spending rose less than expected in May, likely limited by weak healthcare spending, the government said in a report Thursday that could prompt economists to lower their second-quarter growth estimates. The Commerce Department reported that consumer spending rose 0.2 percent last month after no gain in April. Spending, which accounts for about 70 percent of U.S. economic activity, had been expected to rise 0.4 percent in May. Adjusted for inflation, consumer spending fell for a second consecutive month, suggesting spending in the current quarter could struggle to regain momentum after growing at its slowest pace in almost five years in the January-March quarter. In May, spending on durable goods—expensive manufactured items—jumped 0.7 percent, a big rebound following a 0.9 percent drop the previous month. Auto dealers reported their best sales month in nine years. Sales of non-durable goods, like chemicals and paper, rose 0.2 percent last month after a stronger 0.4 percent April gain. Spending on services, including rent and utilities, increased only 0.1 percent. Personal income rose a solid 0.4 percent last month after a 0.3 percent April gain, the report said. In inflation gauge tied to consumer spending increased 0.2 percent in May, rising by the same amount for a third consecutive month. In the 12 months ending in May, the personal consumption expenditures (PCE) index was up 1.8 percent, the biggest gain since October 2012. The inflation measure remains below the 2-percent Federal Reserve (Fed) target. Inflation, which has been depressed by weak healthcare costs and slow wage growth, is being watched for clues on the timing of the central bank's first interest-rate increase.
