US consumer spending rises in May

US consumer spending rose for a second straight month in May on increased demand for automobiles and other goods, but there are fears Britain's vote to leave the European Union could hurt confidence and prompt households to cut back on consumption.

The Commerce Department said on Wednesday consumer spending, which accounts for more than two-thirds of US economic activity, increased 0.4 per cent last month, pointing to an acceleration in economic growth in the second quarter.

Consumer spending in April was revised up to show it advancing 1.1 per cent instead of the previously reported 1.0 per cent jump.

Last month’s increase in consumer spending was in line with economists’ expectations. Last Thursday’s so-called “Brexit” referendum wiped off an estimated $3.01 trillion from global stock markets over two days. Most global equities have since recouped some of the losses, with stock markets in Europe and Asia rising for a second day on Wednesday. US stocks were poised to open higher.

Economists say sustained financial turbulence could hurt consumer confidence and cause companies to either delay or scale back capital projects, exerting further downward pressure on business investment. So far, economists are forecasting that Brexit will subtract an average of two-tenths of a percentage point from US growth over the next six quarters.

When adjusted for inflation, consumer spending rose 0.3 per cent last month after gaining 0.8 per cent in April. Last month’s increase and April’s solid gains could prompt economists to raise their forecasts for second-quarter consumer spending and economic growth.

Reuters