Growth in personal incomes outpaced a modest increase in US consumer spending in May, the government said in a report published today.
The Commerce Department said income grew by 0.3 per cent in May, after being up a revised 0.2 per cent in April.
Consumer spending, which accounts for about two-thirds of economic activity, posted a modest 0.1 per cent gain in the month.
May marked the second month in a row that income growth outpaced spending, which allowed the personal saving rate, the percentage of income left over after expenses, to rise to 3.5 per cent, the highest since February's 3.9 per cent.
The numbers showed a cautious but relatively strong US household sector. While the spending data came in slightly below Wall Street expectations, the income numbers should ease worries about family balance sheets.
With incomes expected to rise in coming months, spending should also perk up, analysts say.
The report also showed inflationary pressures well in check. The price index for personal spending fell for a second straight month, dipping 0.1 per cent overall and was unchanged excluding volatile food and energy prices.
For the 12 months ended in May, the overall index was up only 1.7 per cent and the "core" index rose 1.2 per cent.
Excluding a 1.0 per cent rise in the 12-month period ending September 2001, the rise in the core price index through May was the smallest since October 1965.
Federal Reserve officials in recent weeks have expressed more concern about further decreases in inflation, one factor that led the central bank to cut its key federal funds rate by a quarter percentage point on Wednesday.