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US Consumer Spending Static in May

News, 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