A greater than expected increase in U.S. personal income in June didn't translate into an increased willingness among U.S. consumers to open their wallets, according to the Commerce Department.
In a report released Tuesday, the Commerce Department said personal income in the U.S. rose by $61.8 billion in June, an increase of 0.5 percent.
The income growth was stronger than the 0.4 percent increase predicted by most economists and comes atop revised figures that showed income rose by 0.3 percent in May compared to the 0.2 percent initially reported.
However, consumer spending, known formally as personal consumption expenditures, fell marginally in June, dropping $1.3 billion. Because that decrease represents less than 0.1 percent, Commerce Department figures report it as essentially level.
Additionally, May consumer spending figures, which had initially shown no change, were revised to show a 0.1 percent decrease for the month.
Most economists had predicted that June consumer spending figures would show at least a slight 0.1 percent increase.
The price index for personal consumption expenditures, a measure of potential inflation, increased by 0.1 percent in June, somewhat reversing the 0.2 percent decline posted in May.
The "core" PCE price index, which excludes the volatile food and energy sectors, increased somewhat faster, rising by 0.2 percent in June after a 0.1 percent increase in May.
Nevertheless, the increases in both overall and core PCE price indexes matched the expectations of most economists.
With personal income outpacing consumer spending, the U.S. personal savings rate increased to 4.4 percent for June, up from 4 percent in May. The 4.4 percent June savings rate is the highest since June 2011.
Paul Dales, Senior U.S. Economist at Capital Economics, said, "While this is good for spending in the medium-term, it does suggest that in the second half of the year consumption growth will remain fairly weak."
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