Income Rises .3%; Spending Holds Steady
Americans enjoyed only a modest 0.3% rise in personal income last month and did not increase their monthly spending, the government said today.
The increase in personal income was slightly bigger than in May but still well behind the monthly gains of earlier in the year, the Commerce Department reported. It climbed $12.6 billion last month to an annual rate of $4.4 trillion.
The amount of money Americans had to spend after paying taxes rose even a bit more, 0.6%--yet they resisted spending the additional wealth, as shown by the personal spending rate that remained unchanged, the department said. It was the first time Americans failed to boost monthly spending since September, when it declined by 0.1%.
“This is a further indication that the American consumer is a little bit more reluctant to spend money,” said David Wyss, chief financial economist for Data Resources Inc., an economic consulting firm in Lexington, Mass.
“First, Americans are getting a little queasy about the economy; second, they haven’t been saving much money lately and they think they need more savings; and third, if they bought a new car last year, they really don’t need to buy one this year,” Wyss explained.
Many economists are predicting, however, that consumer spending will rebound somewhat in the second half of the year because of a belief that recent moves by the Federal Reserve to lower interest rates will spur home sales and purchases of big-ticket items such as autos.
As a result of the higher income and stable spending, the savings rate rose 0.5% to 5.9% of personal income during June, the highest since the 6.2% rate in March.