The Commerce Department said on Wednesday consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.4 percent 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 percent instead of the previously reported 1.0 percent jump. Last month's increase in consumer spending was in line with economists' expectations.
When adjusted for inflation, consumer spending rose 0.3 percent after gaining 0.8 percent in April. That could prompt economists to raise their forecasts for second-quarter consumer spending and economic growth.
Consumer spending rose at a 1.5 percent annual rate in the first quarter, holding down gross domestic product growth to a 1.1 percent pace. The Atlanta Federal Reserve is currently estimating second-quarter GDP rising at a 2.6 percent rate.
Despite the steady gains in consumer spending last month, inflation remained benign. The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, rose 0.2 percent last month after a similar gain in April.
In the 12 months through May the core PCE increased 1.6 percent after rising by the same margin in April. The core PCE is the Federal Reserve's preferred inflation measure and is running below the U.S. central bank's 2 percent target.
Last month, consumer spending was boosted by a 0.3 percent jump in purchases of long-lasting manufactured goods such as automobiles. Spending on services increased 0.4 percent.
The U.S. dollar slipped against the euro and sterling for a second straight day on Wednesday on potential profit-taking and a rebound in risk appetite stemming from reduced concerns surrounding Britain's vote to exit the European Union.
Sterling, which suffered its biggest one-day fall in modern history on Friday, was last up 0.7 percent against the greenback at $1.3434. That marked roughly a 3-cent rebound from a 31-year low of $1.3122 touched on Monday, when the currency extended its more than 17 cent decline over a two-day period following the Brexit vote.
The euro was last up 0.33 percent against the dollar at $1.1101, rebounding further from a 3-1/2-month low of $1.0909 on Friday. Analysts said traders were relieved by the prospect of prolonged negotiations among European policymakers before the UK's divorce from the EU.
The dollar index, which measures the greenback against a basket of six other major currencies, was last down 0.46 percent at 95.81 after hitting a more than 3-1/2-month high of 96.705 on Monday.
U.S. President Barack Obama said on Wednesday he expects the world economy will be steady in the short run after Britain's decision but expressed concern about longer-term global growth.
Fitch Rating said “There is little doubt that the UK referendum vote in favour of leaving the EU will take a significant toll on the economy, Fitch Ratings says. Businesses are facing a surge in uncertainty on three separate fronts - the future of the UK's trading relationship with the EU, the shape of the regulatory framework, and domestic political uncertainty, including the future status of Scotland. This uncertainty will prompt firms to delay investment and hiring decisions, while elevated financial market volatility will further damage business confidence.
We expect investment to fall by 5% in 2017 and by 2018 for it to be 15% lower than previously expected in Fitch's May 2016 Global Economic Outlook (GEO).
Fed tightening is now likely to be delayed until December 2016 and the ECB is expected to persist with asset purchases beyond March 2017. The Bank of England is likely to lower interest rates to 25 bps later this year.”
US oil ends 4.2 pct higher, at $49.88, on large crude drawdown
Oil prices jumped more than 4 percent on Wednesday after the U.S. government reported a larger-than-expected weekly drawdown in crude inventories, adding fuel to an existing rally on fading concerns over Britain's exit from the European Union.
The potential for an oil workers strike in Norway and a crisis in Venezuela's energy sector also added support to crude futures.
The U.S. Energy Information Administration said crude stockpiles fell by 4.1 million barrels for the week to June 24, the sixth consecutive week of drawdowns.
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