Spending in June Jumps 1%, Largest Gain in 5 Months

Consumer spending jumped 1% in June, the largest gain in five months, while personal incomes rose 0.4%, the government said today.

The Commerce Department said consumer spending totaled a seasonally adjusted annual rate of $3.64 trillion after being unchanged in May. It was the biggest advance since a similar 1% increase in January.

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

Spending has been weak in recent months. The Commerce Department reported earlier this month that retail sales rose 0.5% in June, the first increase since last January. The department reported last week that personal spending fell 0.3% during the three months ending June 30.

Personal income totaled a seasonally adjusted annual rate of $4.63 trillion following identical 0.3% gains in April and May.

Americans’ savings rate--savings as a percent of disposable income--fell to 4.9%. It had been 5.4% in May and 5.1% in April.

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

The report said Americans’ income after taxes increased 0.5%, up from 0.3% a month earlier.

The key component of the income category--wages and salaries--rose $13.0 billion after a $10.1-billion increase in May.

On the spending side, the increase in personal consumption, which includes everything except interest payments on debt, rose $34.5 billion, including $9.6 billion for durable goods expected to last more than three years.

It was the first increase in durable goods spending since January. A Commerce Department spokesman said automobile sales accounted for a large share of the gain.

Non-durable goods spending rose $8.2 billion for the first advance since February, while spending for services advanced $16.7 billion, the largest jump since a $20.4-billion increase in March.