Consumer spending increased 0.4% in May, a modest gain that suggests Americans remain cautious about their finances.
The Commerce Department said Friday that incomes rose 0.5% and inflation remained tame, increasing just 1.5% in the past year. That's far below the Federal Reserve's target of 2%.
The report comes after a measure of consumer confidence slipped Tuesday. Spending grew last month at its slowest pace since February, a trend that could hold back the broader economy.
The tame inflation reading may make it more likely that the Fed will lift short-term interest rates in the coming months. Fed officials have cited the pace of inflation as a key gauge they are watching as they consider changes to their interest rate policies.