US Consumer Spending Static in May

01 July 2005

'Steady as you go,' was the watchword among American consumers during the month of May, with spending remaining level and incomes up - albeit below forecast.

According to the US Commerce Department, consumer purchases were unchanged last month after rising by just 0.6% in April. A Bloomberg News survey of economists had predicted a median estimated hike in May of 0.1% .

Incomes, however, rose 6.7% year-on-year in May, driven by a 7% uplift in wages and salaries. Disposable (post-tax) income edged-up 0.2%, below the 0.5% rise in April. Over the past twelve months incomes have risen 3.2%.

The personal savings rate - which weighs current income from wages, salaries, dividends, businesses and government payments against spending - rose 0.6%, up from April's 0.5%. This data excludes borrowed money, income from investments or withdrawals from prior savings.

Lastly, some encouragement on the employment front. On Thursday the Labor Department reported that workers filing first-time jobless claims fell 6,000 last week, to 310,000, the lowest since April 16. Economists had been expecting a rise to 325,000, the median forecast in a Bloomberg survey.

Opines Wachovia senior economist Mark Vitner: "The Fed is safe in pushing rates up. The economy is a lot stronger today than most people realize."

Data sourced from New York Times; additional content by WARC staff