Tags: Income | Outpaces | Spending | Consumers | Cautious

Income Outpaces Spending as Consumers Stay Cautious

Monday, 28 Jun 2010 11:12 AM

U.S. consumer spending rose slightly more than expected in May even as savings touched their highest level in eight months, pointing to a recovery that remains on solid ground.

The Commerce Department said on Monday spending edged up 0.2 percent after being flat in April. Analysts polled by Reuters had expected consumer spending to rise 0.1 percent.

Consumer spending is being closely watched to gauge the strength of the economic recovery after a series of reports suggested growth is slackening.

"The data looks in line with a moderate consumer, neither cautious nor expansionary," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto.

A government report on Friday showed consumer spending, which normally accounts for 70 percent of U.S. economic activity, rose at a 3 percent pace in the January-March quarter— slower than the 3.5 percent the government had estimated last month.

Spending adjusted for inflation increased 0.3 percent last month after being flat in April. Real spending on services increased 0.3 percent, while spending on goods rose 0.2 percent, reversing the prior month's 0.1 percent decline, the Commerce Department said.

Personal income increased 0.4 percent after gaining 0.5 percent in April. Markets had expected income to rise 0.5 percent last month.

Real disposable income climbed 0.5 percent following a 0.6 percent increase the prior month.

The saving rate rose to 4.0 percent from 3.8 percent in April. Savings increased to an annual rate of $454.3 billion, the highest level since September. The report also showed the personal consumption expenditures price index, excluding food and energy, rising 1.3 percent in the 12 months to May.

The index, a key inflation measure monitored by the Federal Reserve, increased 1.2 percent in April. U.S. central bank officials would prefer to see inflation running closer to 2 percent.

On the month, the core PCE price index rose 0.2 percent.

Separately, a measure of national economic activity slipped last month. The Chicago Federal Reserve Bank said its national activity index fell to 0.21 from 0.25 in April.

It said a reading above 0.20 was historically linked to a "mature economic recovery following a recession." The three-month moving average indicated limited inflationary pressure over the coming year, the Chicago Fed said.

© 2017 Thomson/Reuters. All rights reserved.

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U.S. consumer spending rose slightly more than expected in May even as savings touched their highest level in eight months, pointing to a recovery that remains on solid ground. The Commerce Department said on Monday spending edged up 0.2 percent after being flat in April....
Income,Outpaces,Spending,Consumers,Cautious
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2010-12-28
 

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