Personal Income and Spending Rise in May

Washington, DC. June 28–Americans spent more freely in May, as consumption rose by the biggest mark in over two years amid strong gains in income.

The Commerce Department said personal consumption rose 1.0% in May, up from a revised 0.2% increase in April. April personal consumption had been previously reported as rising 0.3%. Personal income rose 0.6% in May. The May rise in consumption was the largest increase since a 2.1% increase in October 2001, the Commerce Department said.

The price index for personal consumption expenditures excluding food and energy, a favorite inflation gauge of Federal Reserve policy makers, rose in May by 0.2%. Year over year, personal consumption expenditures less food and energy rose 1.2%.

Economists had predicted vigorous increases in both income and spending, based on rising payrolls and wages so far this year, and booming auto sales during May. A Dow Jones Newswires-CNBC survey of 13 economists had forecast personal income would rise 0.5% and spending would increase 0.8%.

Disposable personal income, or income after taxes, climbed 0.6% in May, following a 0.6% advance in April.

Spending on durable goods — meant to last at least three years — rose 1.7%, after a 0.6% decrease in April. Non-durable goods rose 1.2%, after falling 0.1% in April. Spending on services grew 0.7% in May.

Personal saving as a percentage of disposable personal income was 2.2% in May, down from 2.6% in the prior month.