US consumer spending rises, incomes fall

WASHINGTON (AFP) — US consumer spending rose in June, while household incomes fell sharply as a result of the end of certain stimulus payments, official data showed Tuesday.

The Commerce Department reported consumer spending rose for the second consecutive month, by 0.4 percent, slightly better than the average consensus of analysts for a 0.3 percent increase.

In May, spending rose a revised 0.1 percent, weaker than the 0.3 percent initially estimated.

Personal incomes slipped 1.3 percent June, wiping out the revised 1.3 percent gain in May, the report showed.

This volatility reflected the timing of payments from the government’s 787-billion-dollar economic stimulus, “which boosted personal current transfer receipts in May much more than in June,” the Commerce Department said.

On a nominal basis, it was the steepest drop in incomes since January 2005, and much sharper than the 1.0 percent decline expected.

Excluding the stimulus provisions, the decrease in incomes was 0.1 percent.

President Barack Obama’s stimulus, passed in February, includes personal tax cuts and one-time payments of 250 dollars to eligible recipients of social security and other benefits.

In June, the one-time payments were made to military veterans, boosting incomes by 5.6 billion dollars, compared with the 157.6 billion dollars added in May with payments to a wider pool of recipients.

“The drop in personal income in June wasn’t as bad as it appears. Still, this report overall wasn’t a great portent for consumer spending,” said Briefing.com analysts in a client note..

As the effects of the cash stimulus dwindled, consumers increasingly felt the pinch of falling wages and rising prices amid the worst recession since the Great Depression.

Disposable personal income (DPI) — income less personal taxes — fell 1.3 percent in June after rising 1.6 percent in May.

Private wages and salaries fell to 28.6 billion dollars in June, following a decrease of 11.3 billion in May.

The rate of personal savings — DPI less personal outlays — fell as Americans were pressed to stretch their shrinking incomes.

Personal savings as a percentage of DPI fell to 4.6 percent in June, from 6.2 percent in May.

Real personal consumption expenditures (PCE) fell 0.1 percent, compared with an increase of less than 0.1 percent in May.

Meanwhile, the PCE price index surged 0.5 percent in June after a 0.1 percent increase in the prior month.

Excluding food and energy prices, the core inflation rate on consumer spending rose 0.2 percent, up from a 0.1 percent gain in May.