US con­sumer spend­ing up by most since 2009

The China Post - - FRONT PAGE - BY JOSH BOAK

U.S. con­sumer spend­ing surged in May with the big­gest monthly in­crease in nearly six years — a sign of stronger eco­nomic growth ahead.

The Com­merce Depart­ment said Thurs­day that con­sumer spend­ing rose 0.9 per­cent last month, up from a re­vised 0.1 per­cent in­crease in April. May spend­ing reg­is­tered the big­gest gain since Au­gust 2009, an in­di­ca­tion that the pos­i­tive im­pacts from the solid pace of hir­ing and cheaper ga­so­line are start­ing to rip­ple through the econ­omy.

Per­sonal in­come also in­creased a healthy 0.5 per­cent. The sav­ings rate for af­ter-tax in­come fell slightly to 5.1 per­cent from 5.4 per­cent.

Un­til re­cently, lower gas prices and an im­proved job mar­ket were not enough to un­lock greater con­sumer spend­ing. In­stead, Amer­i­cans ramped up their sav­ings. This helped put their per­sonal fi­nances on a more sus­tain­able path, but it lim­ited the abil­ity of the over­all econ­omy — which re­lies mostly on con­sumer ac­tiv­ity — to grow at a faster pace and po­ten­tially boost their in­comes.

The con­sumer spend­ing re­port con­firms signs else­where that peo­ple are loos­en­ing the grip on their wal­lets.

Re­tail sales climbed 1.2 per­cent be­tween May and April, led by auto deal­ers, cloth­iers and build­ing ma­te­ri­als stores, the Com­merce Depart­ment re­ported ear­lier this month.

Spend­ing at re­tail­ers is up 2.7 per­cent over the past 12 months. This in­cludes an­nual gains of 8.2 per­cent in both the auto and res- tau­rant cat­e­gories.

All of that could lead to more hir­ing, a tighter sup­ply of job ap­pli­cants and larger pay hikes, econ­o­mists say.

The greater spend­ing on build­ing ma­te­ri­als also cor­re­sponds with a surge in home-buy­ing.

Sales of ex­ist­ing homes in May jumped 5.1 per­cent to an an­nual pace of 5.35 mil­lion, the Na­tional As­so­ci­a­tion of Real­tors said Mon­day. The real es­tate mar­ket is on pace for its strong­est year since 2007, the last full year be­fore the re­ces­sion.

Pur­chases of new homes have also jumped, reg­is­ter­ing a 24 per­cent in­crease year-to-date, ac­cord­ing to the gov­ern­ment.

Many econ­o­mists be­lieve it was the se­vere win­ter weather that froze con­sumer spend­ing ear­lier this year, be­fore a bounce back this spring. The over­all econ­omy shrank in the first three months of the year at an an­nual rate of 0.2 per­cent. But an­a­lysts say re­vi­tal­ized con­sumer spend­ing should lift growth back to a re­spectable an­nual rate of 2.5 per­cent or bet­ter in the April-June quar­ter.

Con­sumer spend­ing may be aided by two ma­jor fac­tors.

Amer­i­cans are sav­ing money at the pump. Ga­so­line costs have sta­bi­lized in re­cent weeks. At a na­tional av­er­age of US$2.78 a gallon, they re­main about 90 cents be­low their av­er­age a year ago, ac­cord­ing to the AAA’s Daily Fuel Gauge Re­port.

Also, the econ­omy has added 3.1 mil­lion jobs over the past year and the un­em­ploy­ment rate has fallen to 5.5 per­cent from 6.3 per­cent. The in­flux of pay­checks gen­er­ally leads to ad­di­tional spend­ing by the newly em­ployed.

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