Consumers appear skeptical that the recovery is moving forward
Americans may be back in a recession state-of-mind. Although incomes rose in May, inflation-adjusted spending fell. Meanwhile, saving rose. This consumer behavior, reported by the Bureau of Economic Analysis, is what we would expect to see when an economy is in decline -- not in recovery. The month's results aren't particularly comforting, as it's clear Americans had little confidence about the path of the U.S. economy headed into the summer.
Let's start with the chart for income and spending, not adjusted for inflation:
From the chart, you can see that incomes still grew modestly in May. Personal income rose at the rate of 0.3%, while disposable income increased at the rate of 0.2%. Meanwhile, however, spending was virtually flat.
But when you take inflation into account, the picture worsens:
Suddenly, both income and disposable income barely grew, both increasing by just 0.1%. And spending declined for the second month straight -- by 0.1%. That's not a big decline, but it's an ugly trend. Prior to April, real spending hadn't fallen since January 2010. And real spending hasn't declined for two months straight since March and April 2009.