> May 2009 Personal Income/Spending

Thanks to a hefty dose of government stimulus, personal income jumped by 1.4 percent in May. Transfer payments, bulked up by $250 payments to recipients of Social Security and other government benefits that added $157.6 billion (annualized) to income during May, jumped by 7.8 percent (which we failed to account for in our forecast of just a 0.2 percent gain in personal income). Higher transfer payments and the impact of lower income tax withholding pushed disposable income higher in May. Despite the jump in personal income, consumer spending logged only a 0.3 percent increase during May, aided by stronger vehicle sales and higher gasoline prices. Due to continued restraint on the spending side, the personal saving rate rose sharply in May, reaching 6.9 percent from April’s revised ate of 5.6 percent. One has to go all the way back to December 1993 to find the personal saving rate at such a high level.

 

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