U.S. Tax Rebates Boosted Consumer Spending in May

Spending rose 0.8%

U.S. consumer spending rose 0.8% in May, as Americans spent the proceeds of tax rebate checks, while incomes swelled 1.9%, the Commerce Department said on June 27. The jump in consumer spending last month was significantly boosted by the one-off rebate checks, part of the $168 billion economic stimulus program, the Commerce Department report said. The gains in spending and income were both stronger than most economists had expected.

"The federal government issued rebate payments of $48.1 billion in May. As a result, disposable personal income increased substantially," the government said.

The rise in consumer spending was the strongest since November of last year, while the May gain in personal income was the biggest since September 2005.

Inflation readings contained in the report appeared mixed amid mounting concerns about inflation which have been stoked by rocketing crude oil prices.

The PCE (personal consumption expenditures) price index rose 0.4% in May -- marking its strongest monthly gain since November -- but the core PCE rate, which excludes volatile food and energy costs, increased a mild 0.1%.

Copyright Agence France-Presse, 2008

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