Consumers continue to be prudent in their personal finances, reducing debt and saving more – but that has brought spending by Americans to a sluggish pace and causing some concern of a slower recovery.
Consumer spending increased 0.2 percent in May after a flat April, the Commerce Department said. While slightly above expectations of 0.1 percent, personal savings reached the highest level in eight months.
Spending is the biggest support column of an economic recovery – about two-thirds of activity. But Americans are holding back on buying big-ticket items, despite increases in income.
Personal incomes jumped 0.4 percent after gaining 0.5 percent in April, the Commerce Department also reported.
Americans held on to more of their income with the savings rate climbing to 4 percent last month from 3.8 percent in April. Savings increased to an annualized $454.3 billion, the highest since September.
Consumers have already demonstrated for several months that they are concerned about reducing debt as unemployment remains high and the housing market continues to struggle with foreclosures, negative equity and still-bottoming prices in the hardest hit communities.
Credit card debt registered its 19th-straight month of declines in April, according to the Federal Reserve.
Prices have not been a deterrent to consumers. The spending report’s personal consumption expenditures price index was flat for a second straight month in a row. The core price index – not including food and energy costs – increased 0.2 percent.
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It looks like another Christmas of “wait and see” for most people. Spending will be down again, no turnaround in sight. Anybody have some good news?