Income Edges Up 0.3%, Spending Static

Personal income edged up 0.3% in May for the second straight month, but personal spending was unchanged from the previous month, the government said today in another sign of consumer caution.

Consumer spending is considered a barometer of economic health since it accounts for about two-thirds of the nation’s economic activity.

The Commerce Department reported that incomes totaled a seasonally adjusted annual rate of $4.7 trillion. The 0.3% gain follows three consecutive monthly advances of 0.8% and were the lowest since a 0.2% increase last September.

Consumer spending remained unchanged at a seasonally adjusted annual rate of $3.66 trillion after seven straight months of gains, including 0.5% in April and 0.3% in March. But even the April and March advances were weaker than first thought. They were revised downward from 0.6% and 0.5% reported last month.

Today’s report follows other signs of consumer weakness including three consecutive monthly declines in retail sales through May. It was the first time retail sales had dropped three months in a row since the summer of 1981 during the last recession.

Nevertheless, the difference helped improve Americans’ savings rate. The rate--savings as a percentage of disposable income--rose to 6.2% following a 6% rate in April and a 6.3% rate in March. The March rate was the highest in five years.

A higher savings rate means less dependence on foreign capital, since funds thus would be available domestically for business investment.

The report said Americans’ income after taxes increased 0.2%, the same rate as in April.

The key component of the income category--wages and salaries--rose $10.3 billion after a $16.4 billion gain the previous month.