NEW YORK (Reuters) - U.S. consumer spending in May rose for the first time since February and savings hit a record high as federal stimulus measures boosted incomes, while consumer sentiment edged higher in June, bolstering the view that the economy was close to emerging from recession.
Consumer spending, which accounts for more than 70 percent of U.S. economic activity, rose 0.3 percent in May, the Commerce Department said on Friday. The department also revised up April`s figure to unchanged from a small decline previously.
Personal income jumped 1.4 percent last month, propped by social benefit payments from the government`s massive economic stimulus.
U.S. stocks fell as the jump in savings to the highest level since records began in 1959 boosted worries the economic recovery will not make much headway if consumers save rather than spend. The U.S. dollar extended losses versus the euro as the data reduced safe-haven demand for the greenback.
"Though consumption is positive, it`s kind of a tepid rebound versus the huge bounce-back everyone was expecting. So we have to see if this is stabilization," said Doug Roberts, chief investment strategist at Channel Capital Research in Shrewsbury, New Jersey.
"The government programs are new. We really have no history on it, and the rules tend to be changing as well. Right now we`re on new ground with a lot of this, at least in the short-term."
The stimulus provided for one-time payments of $250 to people receiving Social Security, supplemental security income, and other benefits.
Personal savings jumped to a record annual rate of $768.8 billion. The saving rate climbed to 6.9 percent, the highest since December 1993, the department said.
CONSUMER SENTIMENT RISES
A separate report showed U.S. consumer confidence improved in June to the highest since February 2008.
The Reuters/University of Michigan Surveys of Consumers said its final index of confidence for June stood at 70.8, up from 68.7 in May, equaling February 2008`s reading. This was above economists` median expectation for a reading of 69.0, according to a Reuters poll.
The index of consumer expectations edged lower, however.
"Over the past four months, sentiment has improved moderately, suggesting that consumers` attitudes about the economy are improving," said Steven Wood, chief economist at Insight Economics in a research note.
"However, they remain very cautious. Nevertheless, these data do suggest consumers are no longer shell shocked."
Since the November 2008 low of 55.3, the sentiment index has gained 15.5 points, recouping about one-third of the loss posted since the peak in January 2007. Continued...
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