Inflation moved higher in May while consumer spending continued to show strength, the government said Friday. The PCE index, the Federal Reserve's preferred inflation gauge, rose 0.2% as did the core rate that strips out food and energy.
The rate of inflation over the past 12 months rose to 2.3%, the fastest pace since March 2012. The core inflation rate hit 2%, the Fed's long-run target, for the first time since April 2012.
Consumer spending rose 0.2% in May after a 0.5% gain in April. Economists surveyed by MarketWatch had predicted a 0.6% increase. Personal income rose 0.4% after a 0.2% gain in the prior month.
Consumer spending was held down in May by weak auto sales but has been strong in the second quarter, helped by the recent tax-code overhaul. Disposable personal income rose 0.4%, the largest gain since January. The savings rate edged up to 3.2% from 3%.