While the Commerce Department released a report on Wednesday showing a slightly smaller than expected increase in U.S. personal income in the month of May, the report also said personal spending climbed in line with economist estimates.
The report said personal income edged up by 0.2 percent in May after rising by an upwardly revised 0.5 percent in April.
Economists had expected income to rise by 0.3 percent compared to the 0.4 percent increase originally reported for the previous month.
Disposable personal income, or personal income less personal current taxes, also crept up by 0.2 percent in May following a 0.5 percent advance in April.
Meanwhile, the Commerce Department also said personal spending climbed by 0.4 percent in May after spiking by an upwardly revised 1.1 percent in April.
Spending had been expected to increase by 0.4 percent compared to the 1.0 percent jump originally reported for the previous month.
Real spending, which is adjusted to remove price changes, rose by 0.3 percent in May following a 0.8 percent increase in April.
Steve Murphy, U.S. economist at Capital Economics, said increases in real spending in April and May imply “that even if spending was unchanged in June, second-quarter real consumption growth will be as strong as at 4% annualized.”
“The strength of the May spending report should cement our forecast for a near-3% annualized growth rate in second-quarter GDP,” he added.
With spending rising faster than income, personal saving as a percentage of disposable personal income edged down to 5.3 percent in May from 5.4 percent in April.
The Commerce Department also said its personal consumption expenditures price index inched up by 0.2 percent in May after rising by 0.3 percent in April.
The annual rate of growth by the PCE price index subsequently slowed to 0.9 percent in May from 1.1 percent in April.
Core PCE prices, which exclude food and energy prices, increased by 0.2 percent for the second straight month and the annual rate of growth remained at 1.6 percent for the third consecutive month.
The material has been provided by InstaForex Company – www.instaforex.com