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Rebound in consumer spending augers well for American economic outlook

By Religare

American consumers stepped up purchases last month as household spending rebounded, a sign that the world's biggest economy is overcoming a slowdown, limiting the need for aggressive monthly asset purchases by the US Federal Reserve.

Consumer spending rose 0.3 per cent in May 2013 following a 0.3 per cent decline in the previous month, the Commerce Department said.A rebound in home values, improving income and job growth and easing inflationary pressure have bolstered the personal finances of American consumers, leaving more room for discretionary spending.


The economy added 175,000 jobs in May, up from 149,000 in April while personal incomes climbed 0.5 per cent last month.

Real disposable income, or incomes after taxes adjusted for inflation, rose 0.4 per cent in May following a 0.3 per cent gain in the previous month

Consumer sentiment climbed to the highest level in more than five years in June 2013, a sign that households have overcome the 2 percentage point hike in the payroll tax rate.

Consumer spending is the powerhouse of the US economy, accounting for over 70 per cent of the country's gross domestic product (GDP).

Robust household spending is needed to help overcome the adverse impact of the federal budget sequester cuts which is weighing on US economic growth.

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Story first published: Friday, June 28, 2013, 22:53 [IST]
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