WASHINGTON (AFX) - US consumer spending continued to show signs of moderation in June, but economists said the overall slowdown in spending is part of a re-adjustment that needs to be made during an economic slowdown.
The Commerce Department reported this morning that June consumer spending and personal income rose in line with Wall Street expectations by 0.4 pct and 0.3 pct respectively from May. "In my view, your seeing deceleration in consumer spending," said Mike Moran, a US economist at Daiwa Securities America in New York. "During the second quarter, we had (real spending) growth of 2.1 percent, slower than what your getting in the quarters immediately before that... we are seeing even a move below the 3.0 percent pace that we had in place late last year and early this year, so there are signs of deceleration in consumer spending," Moran said. Consumer spending in May was unrevised at a 0.3 pct gain, but the prior months' spending data were revised down on the back of the second quarter GDP data released on Friday.
"The revised numbers now show a steady 0.2 percent per month increase in real (adjusted for inflation) spending in each of the past three months, if this is maintained then third quarter real spending will rise 2.3 percent, slightly better than the second quarter's 2.1 percent," said High Frequency Economics chief US economist Ian Shepherdson in a note to clients.
Economists also said that tax rebates are expected to give a lift to spending during August and September.
The Commerce Department also reported this morning that the personal savings rate -- personal saving as a percentage of disposable personal income -- was 1.1 pct in June, down from 1.2 pct in May. The personal savings rate had previously been reported as negative every month since last summer, but Friday's revisions to GDP over the past three years showed stronger personal income growth than previously reported.
These revisions produced positive savings rates for the entire period, altering the previous picture.
"Consumers are no longer spending more than they earn," said Shepherdson in reaction to the personal savings rate revisions. "We'd rather see a positive than a negative on the saving rate, but the pattern that we have seen in the saving rate is still pretty much the same, we lost a lot of ground in the late 1990s and I think it is still unsustainably low," added Moran.