U.S. Consumer Spending Power Increases

by: The Good News Economist

Over the last two months, consumer spending power has increased and not just because of income gains. The U.S. dollar actually goes farther these days as prices have dropped on average in the past two months.

Many argue that prices are down largely because of gasoline prices. However, in May overall inflation declined 0.2%, following the -0.1% measure in April. These latest cost of living adjustments are in line with what most economists were expecting and point to good news for consumers -- provided the labor picture continues to improve.

As has been the trend since May of last year, this past week saw several indications that labor indeed will continue to improve. On Thursday the conference board released the leading economic indicators. The most substantial gain in the May report was the factory work-week. The indicators underscored another release on Wednesday which illustrated that overall industrial production in May surged 1.2%, following a 0.7% boost the month before. The production numbers continue to beat the forecast -- this month above the +1.0% consensus estimate.