By Geoffrey Smith
Investing.com -- U.S. inflation weakened in May as consumers reduced their spending in response to this year's surge in prices, data released on Thursday showed.
The price index for core personal expenditures - the Federal Reserve's preferred gauge of changes in the cost of living - rose only 0.3% in the month, leading the annual rate to fall to 4.7% from 4.9%, a slightly bigger drop than that forecast by economists ahead of time. Helped by last year's price rises passing out of the calculations, the year-on-year rate has now fallen for the last three months, strengthening those who believe that it may have peaked.
At the same time, personal spending notched its slowest growth in five months, with a gain of only 0.2%, while April's figure was also revised down to a gain of only 0.6% from an initial estimate of 0.9%. That, too, was weaker than forecasts.
The data are evidence of the economy cooling as high prices force consumers to cut back, at least, on non-essential spending. That may also reflect a modest but now sustained rise in lay-offs: initial claims for jobless benefits came in at 231,000 for last week, little changed from an upwardly revised 233,000 the week before, which was the highest such number since February.