May spend­ing slightly up, by 0.1%

In­crease was de­spite stronger in­come growth of 0.4%

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - In­for­ma­tion for this ar­ti­cle was con­trib­uted by Paul Wise­man of The As­so­ci­ated Press and by Shob­hana Chan­dra of Bloomberg News.

WASH­ING­TON — Amer­i­cans en­joyed a healthy in­crease in in­come in May but didn’t spend much of the gain.

The Com­merce Depart­ment said Fri­day that per­sonal in­come rose 0.4 per­cent in May, up from a 0.3 in­crease in April. But con­sumer spend­ing rose just 0.1 per­cent in May after climb­ing 0.4 per­cent in both March and April.

After-tax in­come rose 0.6 per­cent, the big­gest gain since De­cem­ber 2012. The gap be­tween the May in­crease in in­come and the in­crease in spend­ing drove the U.S. sav­ings rate to 5.5 per­cent, the high­est since last Septem­ber.

Econ­o­mists mon­i­tor con­sumer spend­ing closely be­cause it ac­counts for about 70 per­cent of U.S. eco­nomic ac­tiv­ity. De­spite the mod­est rise in May, an­a­lysts re­main con­fi­dent that con­sumers picked up their spend­ing over­all this quar­ter and will be ea­ger to spend their sav­ings and higher in­comes this sum­mer.

“Real dis­pos­able per­sonal in­come has risen a whop­ping 4.7 per­cent (an­nu­al­ized) over the past three months, the strong­est growth in nearly two years,” James Marple, se­nior econ­o­mist at TD Eco­nom­ics, said in a re­search

note. “This should con­tinue to un­der­pin healthy con­sumer spend­ing through the sec­ond half of the year.”

Amer­i­cans may be re­luc­tant to ramp up spend­ing un­til they see a faster pickup in wages, even as steady hir­ing, health­ier balance sheets and low bor­row­ing costs are help­ing to sup­port their pur­chases.

An out­sized 4.8 per­cent jump in div­i­dends pow­ered May’s gain in in­fla­tion-ad­justed dis­pos­able in­come, which the Com­merce Depart­ment said was the big­gest since De­cem­ber 2012.

Wages and salaries, mean­while, cooled to a 0.1 per­cent in­crease fol­low­ing a 0.5 per­cent gain in April.

Con­sumers got off to a slow start ear­lier this year. From Jan­uary through March, con­sumer spend­ing rose at lack­lus­ter 1.1 per­cent an­nual pace, the slow­est since the sec­ond quar­ter of 2013 and one rea­son the econ­omy grew at an an­nual pace of just 1.4 per­cent the first three months of 2017.

Pres­i­dent Don­ald Trump has pledged to push an­nual eco­nomic growth past 3 per­cent, but most econ­o­mists are skep­ti­cal given Amer­ica’s ag­ing work­force and dis­ap­point­ing gains in pro­duc­tiv­ity — out­put per hour


The Fed­eral Re­serve’s fa­vored mea­sure of in­fla­tion fell 0.1 per­cent from April and rose 1.4 per­cent from a year ear­lier. That was the small­est an­nual in­crease since last Novem­ber and left in­fla­tion be­low the Fed’s 2 per­cent tar­get.

Still, the Fed is con­fi­dent enough in the econ­omy’s health that it raised short­term in­ter­est rates this month and sig­naled that it ex­pects an­other hike some­time this year.


Em­ploy­ees as­sist a cus­tomer with a com­puter at a Best Buy store in Cary, N.C., in this May photo. Con­sumer spend­ing rose just 0.1 per­cent in May after climb­ing 0.4 per­cent in both March and April.

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