US consumer spending spiked a record 8.2% in May as personal incomes fell
- US personal consumption expenditures jumped 8.2% in May following a record drop in April, according to a Friday report from the Commerce Department.
- Also in May, personal income declined 4.2%, the result of a decrease in government social benefits.
- Spending in vehicles, healthcare, and restaurants drove jumps in both goods and services.
US consumer spending posted its biggest jump on record in May as Americans took advantage of economic reopenings to spend government stimulus checks and unemployment benefits. Still, consumption remains below pre-coronavirus levels.
Personal consumption expenditures increased 8.2% in May, the most on record, according to a Friday report from the Commerce Department. The leap follows the biggest drop ever in April as consumers closed their wallets amid pandemic lockdowns. The median economist estimate was for a 9.3% jump, according to Bloomberg data.
Also in May, personal income declined 4.2%, according to the report, where economists had expected a 6% slump. The drop — following a record spike in the previous month — "primarily reflected a decrease in government social benefits to persons as payments made to individuals from federal economic recovery programs in response to the COVID-19 pandemic continued, but at a lower level than in April," according to the report.
The data shows a "recovery underway, but a long and uncertain way to go," said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note.
A recovery in spending is positive for the US economic recovery, as consumption makes up roughly 70% of gross domestic product. Still, the uptick in coronavirus cases in the South and West could threaten consumer spending and lead to a relapse, according to Shepherdson.
And, some of the support from the $1,200 checks sent to Americans and expanded unemployment insurance will likely soon end — the additional $600 per week in benefits is set to expire at the end of July, and it's unclear if more direct checks to households will be approved.
Spending in goods and services both contributed to the $892.6 billion increase in consumer spending in May. The leading contributor to the $590.4 billion jump in goods was spending on motor vehicles and parts, recreational goods, and vehicles.
The $363.8 billion increase in services spending was led by healthcare, as well as food services and accommodations.
The personal savings rate, which surged to a record 32.2% in April, fell to 23.2% in May. The rate is personal savings as a percentage of disposable income. It's still highly elevated compared to pre-pandemic levels — the rate was 8.4% in February.
Wages rose 2.7% in May, the largest jump in more than two decades following a record decline in April, as businesses reopened and hired back workers.
The core price index used by the Federal Reserve to gauge inflation rose 0.5% in May from a year earlier. The core price index, which excludes food and energy costs, rose 1% in the same time period.