Friday June 26, 05:22 PM
US consumer spending rises as incomes surge
WASHINGTON (AFP) - US consumer spending posted a modest gain in May but savings vaulted amid massive government stimulus spending aimed at pulling the economy out of recession, official data showed Friday.
The Commerce Department reported consumer spending rose 0.3 percent in May from April, in line with most analysts' forecast.
The May uptick in personal spending -- which accounts for two-thirds of US economic activity -- followed a revised flat reading for April and a 0.3 percent decline in March.
Personal incomes jumped 1.4 percent in May, the strongest gain in a year, mostly on the back of the 787-billion-dollar stimulus package launched by President Barack Obama in February, the Commerce Department said.
The hefty increase in incomes widely topped the 0.3 percent gain expected by analysts.
Disposable personal income -- income less personal taxes -- increased 1.6 percent May after a rise of 1.3 percent in April.
Excluding the special factors of the huge economic stimulus, which lowers personal taxes and boosts government social benefit payments, disposable personal income increased 0.2 percent, following a 0.9 percent rise in April.
Consumers, however, appeared cautious about spending the stimulus windfall amid rising unemployment, spiking home foreclosures and tight credit in the severe recession that began in December 2007.
The rate of personal savings -- personal income less personal outlays -- surged to 6.9 percent in May, a level last seen in December 1993. In April personal savings rose 5.6 percent.
Total personal savings reached 768.8 billion dollars in May, an all-time high since tracking of the data began in January 1959, the department said.
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