May con­sumer spend­ing up 0.9%

Los Angeles Times - - COMPANY TOWN - By Ji m Puz­zanghera jim.puz­zanghera@latimes.com

WASHINGTON — Amer­i­cans’ wal­lets burst open in May, pro­duc­ing the big­gest spend­ing gain in nearly six years af­ter another strong month of in­come growth.

Con­sumer spend­ing jumped 0.9% last month, a sharp in­crease from an up­wardly re­vised 0.1% in­crease in April, the Com­merce Depart­ment said Thurs­day. The May in­crease was the big­gest since Au­gust 2009. Per­sonal in­come rose 0.5% in May for the sec­ond straight month.

But in­stead of sav­ing much of that money as they did in April, con­sumers spent it.

The por­tion of dis­pos­able in­come saved dropped to 5.1% from 5.4% in April.

Econ­o­mists had ex­pected spend­ing to re­bound last month af­ter a weak April, but the in­crease sur­passed the av­er­age forecast of a 0.7% gain.

In­come growth was slightly bet­ter than the 0.4% forecast.

The an­nual inf la­tion rate held steady in May at 0.2%, well be­low the Fed­eral Re­serve’s tar­get of 2%.

Cen­tral bank pol­i­cy­mak­ers want to see signs that inf la­tion is mov­ing to­ward that level be­fore rais­ing their key short- term in­ter­est rate for the first time since 2006. Many econ­o­mists ex­pect a rate in­crease in Septem­ber.

Since last year, inf la­tion has been held down by lower oil prices. How­ever, oil prices have been ris­ing in re­cent weeks.

Ex­clud­ing volatile energy and food prices, the so- called core inf la­tion rate was 1.2% for the 12 months that ended May 31.

That was down slightly from 1.3% in April.

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