Consumer Spending Hits Two-Year High (savings drop to 2.2% from 2.6%)

[papau]

http://www.nytimes.com/aponline/business/AP-Economy.html?hp

Consumer Spending Hits Two-Year High
By THE ASSOCIATED PRESS

Published: June 28, 2004 Filed at 11:27 a.m. ET

WASHINGTON (AP) -- Consumers -- the lifeblood of the economy -- boosted their spending in May by the largest amount in more than two years, an encouraging sign for the recovery's strength.

The Commerce Department reported Monday that consumer spending rose by a sizable 1 percent, a considerable pickup from the 0.2 percent increase registered in April. The increase in May was the largest since October 2001, when spending rebounded with gusto after being depressed by the Sept. 11 terror attacks.

Americans' incomes, meanwhile, went up by a strong 0.6 percent in May for the second straight month. The growth in incomes in the last two months was especially heartening because that powers spending in the future. The income and spending figures are not adjusted for price changes.<snip>

The latest snapshot of consumer behavior was better than economists were expecting. They were forecasting a 0.8 percent increase in spending and a 0.5 percent rise in income growth.

When the spending figures are adjusted for inflation, consumer spending rose by a more modest 0.4 percent in May after being flat in April.<snip>


With spending outpacing income growth, the nation's personal savings rate -- savings as a percentage of after-tax income -- dipped to 2.2 percent in May, from 2.6 percent in April.

[LittleApple81]

1. I am totally confused. Adjusted for inflation is .4 percent? So why

cite the other figures???
WHO IS SPENDING ALL THE MONEY? I don't have money to spend...

[denverbill]

2. Well, savings rates declined.

So, when gas prices went over $2, people didn't spend any less on other stuff, and they paid more for gas, but they bought in on credit.

[LittleApple81]

4. Aaaaah... now I see. More debt. n/t

[papau]

3. No headline on price index 0.5% rise - fastest in 14 years - inflation?

The Dept of Commerce reported that the price index rose in May.

Commerce Department said in Washington that the report's price index rose 0.5 percent, in part because of fuel prices, and hasn't been higher (as a a one month increase) since September 1990.

Yet the FED will only raise the funds rate from 1% to 1.25% this week - if this were a Democtatic Administration the rise would be 1.5% - and indeed 1.5% is where the rate should be.

The great rise in spending is folks spending now before prices rise even more - meaning the fall could be a bust - or the economy could overheat - and bust.

Deficit forever budgets give rise to rather unstable eras! As in the Reagan reaction to the Aug 81 tax cut was a 14 month deep recession only cured by the most massive deficit spending stimulus in our history followed by no growth Bush41 as we prepared for disaster.

Thank God for Clinton and his tax increase.