US incomes rise marginally in May but consumer spending falls

29 June 2012 18:03  [Source: ICIS news]

WASHINGTON (ICIS)--US personal income rose only marginally in May from April, the Commerce Department said on Friday, and households cut back on spending and increased savings, an indication that consumers are losing confidence about the economy.

In its monthly report on income and outlays, the department said consumers’ after-tax take-home pay increased by 0.2% in May from April, about the same rate of growth seen in April from March.

However, in the first quarter of this year, take-home pay for most Americans saw increases of 3% in January and 4% in both February and March.

Reflecting the April-May slowing in income growth, the department said consumers cut their spending in May.

The report said personal consumption expenditures (PCE) – the department’s term for consumer spending – fell by $4.7bn (€3.7bn) or less than 0.1% in May.

Although a marginal decline, that downturn in consumer spending last month is in contrast to the 0.1% increase ($16.2bn) recorded in April.

Consumer confidence and spending are critical indicators for the US economy because household outlays account for as much as 70% of the nation’s production and commerce.

Overall, the department said private wage and salary disbursements grew by $1.1bn in May, considerably lower than the $5.3bn-advance seen in April.

In goods-producing industries, payrolls fell by $7bn in May compared with April’s gain of $5.6bn.  Manufacturing payrolls also fell in May, down by $4.5bn compared to the increase of $3.2bn in April.

However, the services industry saw an $8.3bn gain in payrolls in May compared to a $400m decline in April.  Government employee wages grew by $300m in May, a slight decline from the $400m expansion reported for April.

As they cut back on spending in May, consumers also tucked more money away. 

The savings rate rose by 3.9% in May compared with the April increase of 3.7%, another sign that consumers are becoming more cautious about the near-term future.

Also on Friday, the University of Michigan’s (UM) survey of consumers indicated that American households are losing confidence. 

The UM index of consumer sentiment fell by 7.7% in June from May, and there was an 8.7% decline in the index of consumer expectations.

($1 = €0.80)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
+1 713 525 2653

AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly

Get access to breaking chemical news as it happens.
ICIS Global Petrochemical Index (IPEX)
ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index