US data shows big rise in personal incomes

Despite a run of gloomy forecasts from the OECD and others recently, better economic news emerged from the United States yesterday. Thanks to tax cuts and social security rebates implemented by the Obama administration, disposable incomes rose at their fastest level for a year, increasing by 1.6 per cent in May, after climbing 1.3 percent in April.

Most, but not all of the increase in incomes was spent, leaving room for a rise in the savings rate to 6.9 per cent, very high by recent American standards; as households seek to pay off debts. However, buoyant consumer spending is pushing more Americans back to the shops: such spending, which accounts for about 70 per cent of the US economy, rose in the first quarter by 1.4 per cent having fallen back in the second half of last year at its fastest rate since 1980

The Reuters/University of Michigan index of consumer sentiment gained to 70.8 from 68.7 in May, it was revealed yesterday. Car sales, which as “big ticket items” benefit the most from improved faith in the future, rose to 9.9 million units in May, up from 9.3 million the prior month. Industry estimates for June show the rate may exceed 10 million for the first time this year.