• Personal consumption rose 0.3% in May 2013, which was in line with market expectations, and largely offset the revised 0.3% dip in April (initially reported as -0.2%).
• On a volumes basis, spending rose 0.2% in May, following a downwardly revised 0.1% drop in April, which was previously reported as a 0.1% increase.
• Personal income posted a solid 0.5% increase in May, which was stronger than market expectations for a 0.2% increase. The savings rate rose to 3.2% from a revised 3.0% in April.
• On balance, US consumer spending likely increased at a slower pace in the second quarter of 2013 than the first quarter’s 2.6% annualized gain. Recent data pointed to auto sales having picked up their pace in June, and the Conference Board’s consumer confidence index posted at sharp 7.1 percentage point jump to stand at a five-year high that is consistent with another increase in activity in June. Still, the headwinds from the fiscal measures implemented in the period from January through March (payroll tax increase and government spending cuts) will continue to limit the pace of spending growth in the second quarter, which we project will increase at a 2.0% annualized pace. Today’s report for May provided mild downside risk to this forecast. Looking beyond the second quarter, the drag from the government’s actions will likely peter out during the summer and, combined with the continued improvement in labour market conditions and household balance sheets as home prices rise, will support a faster pace of consumer spending in the second half of the year.
• In a separate report, US initial claims fell 9,000 to 346,000 in the week ending June 22, 2013 from a revised 355,000.
• The four-week moving average of initial claims, which better controls for weekly volatility, eased to 345,750 from 348,500 in the previous week. Continuing claims inched down by 1,000 to 2,965,000 in the week ending June 15, 2013.
Nominal personal consumer spending rose 0.3% in May 2013, which almost offset a similar-sized decline in April. The monthly rise followed a downwardly revised April print, which now shows a 0.3% decline. May’s report showed durable goods consumption growing at a 0.9% pace while spending on non-durable goods increased by 0.3%. Spending on services continued to be lacklustre growing by just 0.1% in nominal terms following a flat reading in April.
On a volumes basis, personal consumption expenditure (PCE) rose by 0.2% in May although this followed a downward revision to April, which swung to a decline of 0.1% from a gain of 0.1%. The monthly increase in volumes was concentrated in durable goods spending, which jumped by 1.0% with non-durable goods spending rising by 0.5%. Spending on services fell by 0.1% for the second consecutive month in part due to sharply lower spending on utilities, which fell 6.0% in April and 5.2% in May.
Nominal personal income growth came in stronger than expected in May at 0.5% and built on April’s tepid 0.1% gain. The personal savings rate proved higher than expected at 3.2% in May following the upwardly revised 3.0% recorded in April that was previously reported at 2.5%.
On balance, US consumer spending likely increased at a slower pace in the second quarter of 2013 than the first quarter’s 2.6% annualized gain. Recent data point to auto sales having picked up their pace in June, and the Conference Board’s consumer confidence index posted at sharp 7.1 percentage point jump to stand at a five-year high that consistent with another increase in activity in the month. Still, the headwinds from the fiscal measures implemented in the period from January through March (payroll tax increase and government spending cuts) likely limited the pace of spending growth in the second quarter, which we project will increase at a 2.0% annualized pace. Today’s report for May provided mild downside risk to this forecast. Looking beyond the second quarter, the drag from the government’s actions will likely peter out during the summer and, combined with the continued improvement in labour market conditions and household balance sheets as home prices rise, will support a faster pace of consumer spending in the second half of the year.
RBC