Personal Spending and Income Up in May

Washington, DC, June 29, 2007—Personal spending in 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 2004 in the year ended May.

The figures may comfort Fed policy makers who yesterday forecast the economy would grow at a ``moderate'' pace in the second half of the year. Central bankers left interest rates unchanged and said inflation remained their biggest concern pending more evidence that a deceleration would be sustained.

Economists expected spending to increase 0.7 percent.

Personal income rose 0.4 percent in May after dropping 0.2 percent the prior month.

Personal income was forecast to rise 0.6 percent, according to the survey median, following a 0.1 percent decline originally reported for April.

The report's price gauge tied to spending patterns, excluding food and energy costs, rose 0.1 percent in May for a second month, matching economists' forecasts.

The core inflation measure rose 1.9 percent from May 2006, the smallest year-over-year gain since March 2004, according to Commerce Department figures.