The Commerce Department reported on Friday that consumer spending in the U.S. was flat m-o-m in May after a revised 0.9 percent m-o-m advance in April (originally a 0.5 percent m-o-m increase). Economists had forecast the reading to show a 0.4 percent m-o-m gain.

Meanwhile, consumer income fell 2.0 percent m-o-m in May, following an unrevised 13.1 percent m-o-m plunge in the previous month. Economists had forecast a 2.5 percent m-o-m drop.

The May decrease in personal income primarily reflected a drop in government social benefits. Within government social benefits, "other" social benefits fell as economic impact payments made to individuals from the American Rescue Plan Act of 2021 continued, but at a lower level than in April. Unemployment insurance also went down, led by declines in payments from the Pandemic Unemployment Compensation program.

The personal consumption expenditures (PCE) price index, excluding the volatile categories of food and energy, which is the Fed's preferred inflation measure, rose 0.5 percent m-o-m in May, following an unrevised 0.7 percent m-o-m increase in March. Economists had projected the index would advance 0.6 percent m-o-m.

In the 12 months through May, the core PCE surged 3.4 percent, accelerating from an unrevised 3.1 percent in the 12 months through April. Economists had forecast a jump of 3.4 percent y-o-y. This was the highest reading since the early 1990s and was well above the Fed’s 2-percent target.