US consumer spending rose slightly more than expected in May even as savings touched their highest level in eight months, pointing to a recovery that remains on solid ground.
The Commerce Department said today spending edged up 0.2 per cent after being flat in April. Analysts polled by Reuters had expected consumer spending to rise 0.1 per cent.
Consumer spending is being closely watched to gauge the strength of the economic recovery after a series of reports suggested growth is slackening.
A government report on Friday showed consumer spending, which normally accounts for 70 per cent of economic activity, rose at a 3 per cent pace in the January-March quarter -- slower than the 3.5 per cent the government had estimated last month.
Spending adjusted for inflation increased 0.3 per cent last month after being flat in April. Real spending on services increased 0.3 per cent, while spending on goods rose 0.2 per cent, reversing the prior month's 0.1 per cent decline, the Commerce Department said.
Personal income increased 0.4 per cent after gaining 0.5 per cent in April. Markets had expected income to rise 0.5 per cent last month.
Real disposable income climbed 0.5 percent following a 0.6 per cent increase the prior month.
The saving rate rose to 4.0 per cent from 3.8 per cent in April. Savings increased to an annual rate of $454.3 billion, the highest level since September. The report also showed the personal consumption expenditures price index, excluding food and energy, rising 1.3 per cent in the 12 months to May.
The index, a key inflation measure monitored by the Federal Reserve, increased 1.2 per cent in April. US central bank officials would prefer to see inflation running closer to 2 per cent.
On the month, the core PCE price index rose 0.2 per cent.
Separately, a measure of national economic activity slipped last month. The Chicago Federal Reserve Bank said its national activity index fell to 0.21 from 0.25 in April.
It said a reading above 0.20 was historically linked to a "mature economic recovery following a recession." The three-month moving average indicated limited inflationary pressure over the coming year, the Chicago Fed said.
Reuters