US incomes surge as stimulus kicks in
By Alan Rappeport in New York
Published: June 26 2009 14:16 | Last updated: June 26 2009 14:16
Copyright The Financial Times Limited 2009
Personal income in the US surged in May as government stimulus funds began working their way through the economy and consumers upped their spending for the first time in three months.
Official figures showed on Friday that incomes jumped by 1.4 per cent last month, or $167.1bn, beating economists’ expectations and doubling the previous month’s revised rise of 0.7 per cent. Personal consumption expenditure rose by 0.3 per cent or $25.1bn last month, in line with estimates, and a rebound from April’s pull-back.
EDITOR’S CHOICE
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The sharp rise in spending was mainly due to benefits payments doled out through the American Recovery and Reinvestment Act of 2009, which provides one-time payments of $250 to people who receive Social Security funds, veterans benefits or railroad retirement income. Although disposable personal income rose by 1.6 per cent in May, it increased by just 0.2 per cent excluding the stimulus benefits.
The commerce department’s closely-watched gauge of prices rose by 0.1 per cent for the second consecutive month in May, easing fears that stimulus measures will fuel inflation. Excluding food and energy, prices were also up by 0.1 per cent, down from April’s 0.3 per cent increase.
Meanwhile the savings rate, which is measured as the proportion of income left after spending and taxes, rose to a 16-year high of 6.9 per cent last month, up from a revised 5.6 per cent. Some economists predict that the savings rate could reach as high as 10 per cent as the recession has caused a collapse in household wealth, while others argue that stimulus will continue to spur spending.
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