US Consumer Spending Continues to Grow

03 July 2001

Despite the well-publicised economic gloom, spending by American consumers continues to remain buoyant, according to figures from the US Commerce Department.

Personal-consumption expenditure rose 0.5% in May, the same amount as in April, outstripping the sluggish 0.2% growth in earnings. Spending on big-ticket durable goods such as cars or washing machines saw a particularly high increase of 1.2%, well above the 0.1% jump the month before.

Inflation remained low, with the price index compiled from the income and spending report rising only 0.1% in May.

There was also some good news for the beleaguered manufacturing sector, as the National Association of Purchasing Management announced its manufacturing index rose from 42.1 in May to 44.7 in June. Although any figure below 50 represents a contraction in the sector, June’s tally marked the highest point reached by the index since November.

However, the economy is far from out of the woods. “The true test is going to come over the next couple of months, with the employment market staying downbeat, and what happens to consumption then,” commented Joseph LaVorgna, a Deutsche Bank senior economist in New York. “People are going to be surprised at the relative sluggishness of the recovery.”

News source: Wall Street Journal