Americans’ income and spending failed to keep pace with price hikes in May, the latest sign that the fastest rate of inflation in a generation is cutting off the mainstay of the economic recovery.
The Commerce Department said Thursday that consumer spending, adjusted for inflation, fell for the first time this year, down 0.4 percent from April. In addition, spending rose more slowly in the first four months of the year than previously reported, the government said, and after-tax income, adjusted for inflation, fell slightly.
The report provided fresh evidence that the US economy is stuck in a delicate equilibrium as the Federal Reserve attempts to control inflation. Policy makers want to cool down consumer demand for goods and services, which has outpaced supply, driving up prices. But if the central bank aggressively suppresses demand while prices are already reducing consumption, it could cause a recession.