Consumers Make More, Spend Less In May

By John S. McClenahen Consumer spending, which accounts for about two-thirds of the U.S. economy, was less in May than most economists expected. Between April and May, so-called personal consumption expenditures decreased $4.2 billion or 0.1%, reports the U.S. Commerce Department's Bureau of economic Analysis. Economists had forecast no change between April and May. However, "spending looks like it rebounded in June and real consumer spending appears to be up around a 2.5% rate in the second quarter," says Gerald D. Cohen, a senior economist at Merrill Lynch & Co., New York. "We believe third-quarter spending will be stronger." Meanwhile, personal income increased $23.1 billion or 0.3% in May, right in line with most economists' expectations. Nevertheless, "over the latest three months, thanks largely to slender job growth and slowing wage gains, [personal income] rose just 1.8% annualized," notes Maury Harris, chief U.S. economist at UBS Warburg LLC, New York. "This modest income gain . . . helped to cap household spending in the second quarter." One other note: The personal savings rate -- technically, personal saving as a percentage of disposable personal income -- was 3.1% in May, up from 2.8% in April, but lower than the 3.4% Merrill Lynch expected.

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