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June 28, 2010    

US consumer spending creeps up 0.2% in May

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by Kay Murchie
”US

According to the Commerce Department, consumer spending in the US rose to an eight-month high in May, by 0.2% on month, suggesting the recovery is still on course.

The rise in consumer spending, which makes up for more than two-thirds of overall economic activity in the US, slightly exceeded expectations of a 0.1% rise.

The news sent the Dow Jones industrial average rose 49.27 points, or 0.5% in midday trading, while the broader Standard & Poor’s 500 index gained 4.79 points (0.4%) and the Nasdaq composite index added 15.80 points, or 0.7%.

Commenting on the data, Julia Coronado, an economist at BNP Paribas in New York, said: “Consumers are spending at a reasonably solid pace, but are still conservative. With two months of the (second) quarter in hand, consumers are at roughly the same pace of spending growth as we saw in the first quarter.”

In related news, last week the Commerce Department revealed that the world’s no.1 economy grew at a slower rate in the first quarter than previous estimates showed.

According to official figures, the US economy grew by an annualised 2.7% in the January to March period – slightly lower than the 3.2% previously estimated.

The downward revision was due to a slower rate of business investment and consumer spending.

However, it still means the world’s largest economy has grown for three consecutive quarters as it continues its recovery from the worst recession in decades.

Meanwhile, unemployment in the world’s largest economy remains high. Recent figures show the unemployment rate fell to 9.7% in May, from 9.9% in April.

The economy added 431,000 jobs last month – the majority of them temporary Government jobs to help conduct the 2010 census.

However, the figure fell far short of the 515,000 expected by analysts and followed an unrevised 290,000 increase in April.

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