May Spending, Income Post Anemic Gains

American’s personal income rose a lackluster 0.3% in May, the smallest gain in eight months, as consumer spending posted its weakest advance since October, the government said today.

Consumer spending represents two-thirds of the U.S. economy, and analysts closely monitor fluctuations in both spending and income as a barometer of the economy’s overall health.

Economists are likely to consider the small gain in income, the slowest since September, as a sign that consumer demand may slacken.

The income boost followed stronger gains of 0.5% in April and 0.9% in March. However, the Commerce Department noted that the March gain was swelled by two special factors: profit-sharing payments to auto workers and retroactive Social Security checks. That made the April rise look smaller. A dip in farm subsidy payments in April made the May rise appear larger.

Disposable, or after-tax, income surged 1.4% in May after falling 0.7% in April. April tax payments took a larger-than-expected bite out of income, and May figures represent a rebound.

Personal consumption spending, which includes everything except interest on debt, rose a modest 0.3% last month, following a 1.1% surge in April and a 0.4% gain in March.

The personal savings rate rose to 5.3% in May from 4.3% in April.