ByÂ Christopher S. Rugaber-Associated Press
WASHINGTON (AP) â€” Americans spent in May at the weakest pace in 20 months, a sign that high gas prices and unemployment are holding back the economy.
ConsumerÂ spendingÂ was unchanged, theÂ Commerce Department said Monday. That was the worst result since September 2009. And when adjusted for inflation,Â spendingÂ actually dropped 0.1 percent.
Aprilâ€™sÂ consumerÂ spendingÂ figures were revised to show a similar decline when adjusting for inflation. It marked the first decline in inflation-adjustedÂ spendingÂ since January 2010.
Incomes rose 0.3 percent for the second straight month. But adjusted for inflation, after-tax incomes increased only 0.1 percent in May, after falling by the same amount in the previous month.
Stock futures fell immediately after the report was released. Dow futures plunged 115 points.
â€œIt was a very poor report all around,â€ he said. â€œI think itâ€™s clear that higher gasoline prices are taking a bite out ofÂ consumerÂ spending.â€
ConsumerÂ spendingÂ accounts for 70 percent of economic activity. The spike in gas prices has forced manyÂ consumersÂ to cut back on discretionary purchases, such as furniture and vacations, which help boost growth.
Fewer jobs and high unemployment have left workers with little leverage to ask for raises, and slow wage growth hurts the broader economy becauseÂ consumersÂ have less money toÂ spend.
Hiring slowed considerably this spring after a strong start at the beginning of the year. The economy created only 54,000 jobs in May, the lowest number in eight months. That followed three months in which employers hired an average of 220,000 net new workers each month. The unemployment rate rose to 9.1 percent last month.
The economy expanded at an annual rate of 1.9 percent in the January-March period. Many economists believe that growth is only slightly better in the current April-June period.
To read more, visit:Â http://www.washingtontimes.com/news/2011/jun/27/americans-spend-weakest-pace-20-months/
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