Consumer spending, incomes rise in May

By Reuters
Posted June 28, 2010 at 7:39 a.m.

U.S. consumer spending rose slightly more than expected in May even as savings touched their highest level in eight months, a government report showed on Monday. The Commerce Department said 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 the government lowered estimates for the first quarter, holding back gross domestic product growth during that period.

A government report on Friday showed consumer spending, which normally accounts for 70 percent 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.

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