- Personal income increase much for than expected, but a large part was due to the increase in government social benefit payments of $250 payments to social security beneficiaries.
- Report showed that personal income jumped +1.4% in May following an upwardly revised +0.7% increase in April.
- Economists had expected income to rise +0.3%
- A reduction in taxes and increased government benefit payments associated with the economic stimulus package contributed to the bigger than expected increase in personal income.
“That’s the whole point — put money back in the pockets of consumers and households and they’ve accomplished that. The good news is, it’s working. The question is, how much of this is a blip?” – Nariman Behravesh (Chief economist, IHS Global Insight)
- Disposable income though on the other hand increase by a much more modest +0.2% in May.
- With personal income increasing much more than spending, savings as as percentage of disposable income was +6.9% in May compared with +5.6% in April.
- Economist say the recent spike in personal savings was likely to fall slightly as the effects of government stimulus fade, but they have said that Americans are becoming more thriftier and are not likely to return to the spendthrift patterns that field much of the growth in the last 9 years.
“I clearly see signs of households altering their behavior in the face of large capital losses in investment and real estate portfolios, an abysmal labor market and tight credit.” – Joshua Shapiro (Economist of MFR)
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