Consumer spending rose a mild 0.1% in May, but households have shown little inclination to cut back much even in the face of rising interest rates and lingering talk of recession.

Analysts polled by the Wall Street Journal had forecast 0.2% increase in spending.

Incomes increased 0.4% in May, the government said Friday.

Consumer spending is the main engine of the U.S. economy. Households boosted spending at a 4.2% annual pace in the first quarter to mark the biggest increase in two years.

Rising interest rates and persistent inflation haven't done much to dramatically slow the economy this year.

The economy grew at a solid 2% pace in the first quarter and could mimic that level of growth in the second quarter.

Americans are still buying lots of cars and spending on travel and recreation, the sort of purchases that point to a sturdy economy.

If the past is any guide, though, higher rates will eventually dampen consumer spending and business investment. Many economists still think the U.S. is headed toward a mild recession by next year.

Source : MarketWatch