Consumer spending came to a standstill last month

Consumer spending has slowed sharply over the past month – good news for policymakers worried about inflation, but also a sign that a crucial driver of the economic recovery is finally losing steam.

US consumers spent just 0.1 percent more in May than the previous month, according to the US Department of Commerce said Friday. That was down from growth of 0.6 percent in April, which was revised down from an earlier estimate of 0.8 percent. Adjusted for inflation, spending remained flat in May. The numbers may fluctuate from month to month, but forecasters expect spending to continue to cool as rising interest rates and declining savings take their toll on consumers’ wallets.

The surprising resilience of consumer spending is a big part of why the economy has so far defied predictions of a recession. For much of this year, Americans have continued to cut back on cars, vacations and restaurant meals, offsetting weakness in other sectors of the economy, such as business investment and housing. If that changes, a recession could become inevitable.

Still, a more modest slowdown would be welcome news to Federal Reserve officials, who are concerned that strong consumer demand is driving up prices and making it more difficult for the central bank to control inflation.

Policymakers are unlikely to take too much comfort in a single month’s worth of data. Spending previously showed signs of slowing down – most recently at the end of last year – only to pick up again after a few months. And as long as the labor market remains strong, Americans will have money to spend: Personal income rose 0.4 percent in May, slightly faster than in April, driven by continued strong increases in wages and salaries.

But this time, there are indications that consumers are becoming more cautious. After months of saving amid rising prices, Americans have begun to save more, historically signaling concerns about the economy. And more households are falling behind on debt payments, suggesting they are having a harder time keeping up with rising prices.

“Consumers are saving more and spending less, perhaps out of caution, as most believe a recession is on or imminent,” Robert Frick, a business economist at Navy Federal Credit Union, wrote in a note to clients.

Fed officials will get a fresh look at the state of the labor market next week when the labor department releases data on job openings, hiring and unemployment.