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Check Out Line: Consumer spending shows a tiny rise

June 26, 2009

cash-register3Check out a government report showing that U.S. consumer spending rose 0.3 percent in May after an upwardly revised flat reading in April.

It was the first gain in spending since February, as government stimulus pushed incomes higher.

“Probably the increase in personal income was due to the increasing transfer payments coming from the government right now as you’re starting to see some of the stimulus kick in,” said Doug Roberts, chief investment strategist at Channel Capital Research.

“But right now what you have to look at is, though consumption is positive, it’s kind of a tepid rebound versus the huge bounce back everyone was expecting. So we have to see if this is stabilization.”

Meanwhile, personal income in May surged 1.4 percent from April as social benefit payments included in the government’s massive economic stimulus jumped. The stimulus provided for one-time payments of $250 to people receiving Social Security, supplemental security income and other benefits.

But much of that stimulus money has not yet been spent. The data showed the savings jumped to a record annual rate of $768.8 billion — the highest level since records began in 1959. The saving rate climbed to 6.9 percent, the highest since December 1993.

“The rise in consumption was normal, but the rise in income was abnormally high because of government payments to people with the stimulus and social security, etc,” said Richard Hoey, chief economist at Mellon Financial Corp.

“You’re going to get a lot of commentary about the super-high savings rate, but the reason the rate was high was because of this abnormal burst of income at a rate that is clearly unsustainable. The rise in the savings rate isn’t reflective of any behavioral phenomenon in the consumer. It is a one-month burst in income.”

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(Photo: Reuters)


This is not looking too good, its not the huge bounce back people hoped for. If you look at the enormous amount of money being pumped into the economy 0.3% is very very meagre.


The “spike” in consumer spending does not exist and is merely more government sponsored hype designed to make people think that everybody’s spending money so that they’ll go out and spend money. The stock market is down, crude is up, jobs are down, and unemployment is up. Nobody is spending anything extra, except for the CEO types because they have continued to outsmart all of us by increasing their salaries and continuing to receive self authorized bonuses. Pretty cool.

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