RSSConsumer income and spending improving even without rebates
 | Seed Newsvine |
Notwithstanding the recent reports of still plunging confidence and home prices, $140/bbl. oil and the near 20% fall in stock market indexes, the economy remains on track to improve in the second half of the year and permit construction spending to turn from decline to increase. Serious constraints on economic growth still persist, notably oil, confidence and home and stock asset values, which will keep economic growth subpar and construction growth marginal into next year.
Less than half of the rebate checks were received in May so May’s 5% spike in real disposable income will be repeated again in June. The improvement in the May savings rate to 5.0% from 0.4% in April means than most of the May rebate checks have yet to be spent. Real consumer spending increased only 0.4% in May after a 0.2% rise in April so the pump is primed for a much large burst of spending in June.
Not impacted by the rebates, wage income jumped $16 billion (annual rate) after a $10 billion drop in April. Similarly, proprietors’ income (mostly farm) increased $2 billion more in May than April. April real income and spending, initially reported to be unchanged, was revised up to a 1.2% annual growth pace for income and a 2.5% growth pace for spending.
