Wednesday 3 August 2005

US spending and income rise in June

Yesterday, the US Commerce Department reported that factory orders rose 1 percent in June on strong demand for computers and electronics. Orders for durable goods were revised up to 2.0 percent from the previously-reported 1.4 percent.

In another report, the Commerce Department announced that US consumer spending rose 0.8 percent in June. Purchases of motor vehicles and parts boosted overall spending. Personal income and disposable personal income increased 0.5 percent. In May, consumer spending had been down less than 0.1 percent, while personal income and disposal personal income had been up 0.2 percent. The price index based on personal consumption expenditure was little changed in June from May.

Reuters has a story covering these reports as well as two other reports on US retail sales showing "buoyant consumer spending at the end of July".

The bad news though is that the US saving rate dropped to zero. No wonder Americans are drowning in debt. The increased value of real-estate holdings has helped American consumers spend, but as Mark Gilbert says in his article "Home Bubbles Don't Deflate, They Burst": "God help the U.S. economy if consumers can't rely on ever-higher property prices to boost their sense of economic well-being."

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