U.S. personal spending jumped 0.9% in May, on the high end of the range of expectations and the largest increase since August 2009. In real-terms, the gain (of 0.6%) was also impressive, along with the upward revisions that dated back to the start of the year.
Personal incomes grew 0.5% for the second straight month, and there, too, were upward revisions going back to the beginning of 2015. Note that the savings rate of 5.1% is the same as a year ago, which suggests that consumers didn't pocket all of those gains from lower energy prices.
On the spending front, that big increase in auto sales (highest in nearly a decade) showed up clearly in this report. Spending on durable goods jumped 2.3%-cars +4.0%, household equipment +1.5%, recreational goods & vehicles +1.3%). Non-durables were up 0.9% (gasoline +3.8% was the big one) while services spending was steady at +0.2% (recreation services was up a solid 0.8%).
Core PCE was in line with expectations, up 0.1% in the month while the y/y increase slowed to +1.2% from +1.3% in April, the slowest in over a year. But the 6-month annualized trend picked up to +1.2%, the fastest since Nov. Something to watch says BMO Capital Markets. Recall core CPI is also picking up.
"The U.S. economy is rebounding from that weak first quarter. And the consumer is playing a large role." notes BMO Capital Markets
