Personal income in the US surged in May thanks to an infusion of government stimulus funds, while consumers raised their spending modestly as confidence about the state of the economy continues to improve. Most of the monthly rise was the result of Federal benefit transfers and lower taxes. Americans, still facing rising job cuts and falling home prices have been saving most of the additional funds, lifting the savings rate to a 16 yr high in May. “Households are reverting to a more sustainable spending path vis-à-vis income that allows scope for paying down debt and adding to savings,” said Joshua Shapiro, chief US economist at MFR. Official figures showed last Friday that incomes jumped by 1.4% last month, or US$167.1B, beating economists’ expectations and doubling the previous month’s revised rise of 0.7 %. Personal consumption expenditure rose by 0.3% or US$25.1B last month, in line with estimates, and a rebound from April’s pull-back.
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