Consumer spending up, savings down

08.05.09
By James Conroy

Although many Americans are still struggling with credit card debt and paying off home loans, new figures indicate that consumers may have a better feeling about the economy as they increased spending slightly in June for the second straight month even while incomes fell by the largest amount in four years.

The numbers from the Commerce Department indicate that consumer spending increased 0.4 percent in June. However, when adjusted for inflation, spending actually fell 0.1 percent in June after holding steady in May.

These figures are tempered by the news that incomes for American workers also fell 1.3 percent in June - the biggest decline since 2005.

Robert Dye, a senior economist at PNC Financial Services Group in Pittsburgh told Reuters that the numbers indicate that while the economy is not rebounding, it is becoming more steady.

"This is indicative of the state of the economy. As we turn the corner on this recession, we find the economy stabilizing but definitely not resurging," he told the wire service. "We're going to see fairly soft economic numbers for some time."

Americans also appear to be saving less with the Commerce Department reporting that after rising to 6.2 percent in May, the nation's saving rate fell to 4.6 percent in June.

But some economists say rising costs and lack of income are behind these figures - not necessarily a turnaround in the buying trends of American consumers.

"Consumers are not spending any more money," Steven Ricchiuto, chief economist at Mizuho Securities, told the New York Times. "They're still consolidating."

Economists also say the nation's unemployment rate is a factor behind the numbers. The Bureau of Labor Statistics' June report placed the unemployment rate at 9.5 percent - a figure that many believe will rise when July's report is released this week.

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Consumers are not putting as much in the bank as they did in May