U.S. savings rate falls to 0% in June

[Paciente]

02 Aug 2005 13:14 GMT


U.S. savings rate falls to 0% in June


WASHINGTON (AFX) -- U.S. consumer spending grew 0.8% in June, offsetting a sizable 0.5% gain in incomes, the Commerce Department said Tuesday.

The agency also reported that the personal savings rate fell to 0%, the lowest since a consumer spending binge in October 2001 and the second-lowest since the Great Depression.

June's spending increase was the largest seen on an inflation-basis since July 2004.

Meanwhile, inflation was calm, with both headline and core inflation measures flat for the month. Core inflation is running at a rate up 1.9% in the past 12 months, the smallest gain since last August.

Economists had expecting incomes to rise 0.4% in June, with spending projected to rise 0.8%, according to a MarketWatch survey.

Incomes rose 0.2% in May, while spending was flat.

The data released Tuesday provide monthly details of quarterly data released on Friday.

The June data elicited little reaction in financial markets.

The surge in spending was largely due to autos. Spending on durable goods of all sorts increased 2.9% in June, reversing a 2.9% decline in May.

Spending on nondurable goods increased 0.7% in June after falling by 0.2% in May.

Spending on services increased 0.5% in June after rising 0.6% in May.

Most of gain in incomes came from business income and income from assets owned. Labor income lagged.

Income from wages and salaries increased 0.2%, while supplements to wages increased 0.3%. Proprietors' income advanced 2%. Income from assets grew 1.3%, including a 1.5% increase in income from interest payments. Income from dividends increased 0.8%.

Disposable incomes increased 0.5% in June.

With inflation rates flat, real disposable incomes increased 0.5% as well. Real consumer spending increased by 0.8% for June, the best since 0.9% in July 2004.