US consumer spending rose slightly more than expected in June, lifted by expenditures on nondurable goods even as incomes saw their biggest drop in four-and-a-half years, a government report showed today.
The Commerce Department said spending rose 0.4 per cent after a revised 0.1 per cent increase in May, previously reported as a 0.3 per cent rise.
That compared to market expectations for a 0.3 per cent increase in spending, which accounts for over two-thirds of US economic activity. However, adjusted for inflation, spending fell 0.1 per cent after being flat in May.
A government report last Friday showed spending fell at a 1.2 percent rate in the second quarter, after rising 0.6 per cent in the January-March period.
Personal income declined 1.3 per cent in June, the biggest decrease since January 2005, the Commerce Department said. This was worse than market expectations for a 1.0 per cent drop and reflected the government's one-time payments to social security recipients in May which were not repeated in June.
Real disposable income tumbled 1.8 per cent in June, the largest decline since last June, the department said. The decline in income saw a decrease in savings during the month.
Savings fell to an annual rate of $505 billion, with the saving rate slipping to 4.6 per cent versus 6.2 per cent in May. A measure of inflation closely watched by the Federal Reserve, the year-on-year personal consumption expenditures index excluding food and energy rose 1.5 per cent after a 1.6 per cent increase in May.
Reuters