US consumer spending –0.1%, personal savings +5.7%

US Consumption

• US consumer spending dropped from April to March–0.1% in May after a revised –0.3% in March.  Which was slightly better than expected of of a –0.2%
• Savings jumped to a record annual rate of $620.2 billion.  The savings rate rose 5.7% in April, the highest level since February 1995, from 4.5% in previous months.
• Households buffeted by job losses and falling asset values, are cutting spending on nonessential items, preferring to save an extra income.
• The modest decrease in consumer spending came amid a –0.7% decrease in spending on both durable goods and non-durable goods.
• Spending on services edged up 0.2%
• Real spending on durable goods fell –0.7% in April led by autos.
• Real spending on non-durable goods were down –0.7%

 

US Savings

• With income rising and spending falling, personal savings as a % of disposable personal income was 5.7% in April, compared with 4.5% in March. 
• With the increase in personal savings rate rose to its highest level since February 1995.
• Consumer spending accounts for 70% of US GDP.
• The tax cut in the stimulus plan added $9.8 billion on an annual rate to disposable incomes in April.
• Another provision added $25 a week to unemployment compensation, pumping $11.8 billion annually into incomes.

 

Source: WSJ, Reuters, CNN Money, MarketWatch & Barron's