US consumer spending declined in May by the most since the start of the year, indicating elevated uncertainty around the Trump administration’s economic policies is increasingly weighing on the outlook for growth.
Personal consumption expenditures fell 0.3% after adjusting for inflation, according to Bureau of Economic Analysis figures published Friday. The Federal Reserve’s preferred inflation gauge, the PCE price index minus food and energy, rose 0.2% — slightly more than expected.
The decline in spending, which was broad-based, coincides with declining consumer sentiment this year in response to President Donald Trump’s unpredictable trade policy. Inflation has been muted so far in 2025, though many economists expect that it will pick up in the next few months as businesses increasingly pass higher import duties on to households.
Sluggish household demand in May follows the weakest quarter for consumer spending since the onset of the pandemic — a slowdown that risks spilling over into a downshift in job growth.
Personal income, meanwhile, fell in May by the most since 2021 on a pullback in government transfers. Wages climbed 0.4% for a second month, extending a recent run of solid increases. That indicates consumers have the wherewithal to continue spending. The saving rate fell to 4.5%.