During May 2009, US consumers saved significantly more money than they did in April 2009, but also earned and spent a little more, according to the most recent Personal Income and Outlays Report from the Bureau of Economic Analysis (BEA), which indicates that the financial picture for American consumers may be showing signs of improvement.
According to BEA estimates (via Retailer Daily), US consumers’ personal consumption expenditures, which essentially reflect consumer spending, increased $25.1 billion, or 0.3%, in May. The BEA also estimates that during the month, personal income increased $167.1 billion, or 1.4%, and disposable personal income increased $178.1 billion, or 1.6%.
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In contrast, during April 2009, personal consumption expenditures increased $1 billion, or less than 0.1%, personal income increased $78.3 billion, or 0.7%, and disposable personal income increased $140 billion, or 1.3%.
As in April, the BEA attributed much of the change in disposable personal income, which is personal income less current personal taxes, to changes in the American Recovery and Reinvestment Act (pdf) of 2009, which reduced personal current taxes and increased government social benefit payments. Excluding these special factors, disposable personal income increased $20.6 billion, or 0.2%, in May, following an increase of $101.3 billion, or 0.9%, in April.
Consumers sharply increased their personal saving during the month. In May, consumers saved $768.8 billion, a 26.3% increase from the $608.5 billion saved in April. Personal saving as a percentage of disposable income was 6.9% in May, compared with 5.6% in April. Similar jumps in total personal saving figures and percentages occurred between March and April 2009.
Retailer Daily also reports that the retail industry will not likely be encouraged by consumers who continue to save, rather than spend, but slow, steady rises in spending and disposable personal income are positive signs for the industry. Another positive sign for retailers is the May 2009 performance of the Consumer Confidence Index, which increased from 40.8 in April to 54.9 in May. Much of the overall increase came from significant improvements in the Consumer Expectations Index, which measures consumer expectations for economic performance in the next six months. However, retailers also need to be cognizant of the continuing rise in consumer unemployment, which hit 9.4% in May.
Similar research from Harris Interactive found that consumers are saving more and spending and borrowing less, though they are not rebalancing their investment portfolios.