US spending spree still on

Consumers continue to spend but not save

US consumers are still spending more than they are earning, despite the slowing economy.

A leading indicator of US consumer confidence rebounded in May as Americans showed they were more optimistic about the long-term jobs outlook, despite a flood of corporate layoffs.

The Conference Board said on Tuesday its index of consumer attitudes jumped to 115.5 in May, up from an upwardly revised 109.9 in April and compared with a four-and-a-half-year low of 109.2 hit in February.

Analysts had been expecting a figure of 111.2.

"Latest findings report rising confidence about job prospects over the next six months, but reveal growing concern about the current job market," said Lynn Franco, director of the Conference Board's consumer research centre.

"Nowhere, however, are there indications that consumers will curtail their spending, which points to continued economic growth," she said.

Spend, spend, spend

Consumer spending, which accounts for two thirds of US gross domestic product, has been identified by US Federal Reserve chairman Alan Greenspan as a critical factor if the US economy is to avoid recession.

Personal income data showed earnings were up 0.3% in April against a rise of 0.5% in March, while personal spending rose 0.4% against 0.3% the month before.

The Commerce Department figures were in line with analyst expectations.

There were still no signs that consumers had started to save, following years of big spending, even after the strong falls in stocks last year.

The April savings rate fell by 0.7% on the month.

Mixed picture

Economic data in recent weeks has been painting a mixed picture, with no signs that the US Federal Reserve's interest rate cuts have reversed the slowdown.

Last week, data showed that inventories had plunged in the first three months of 2001 because unsold goods from late last year prompted output cuts, which contributed to the economic slowdown.

Also a sharp fall in new orders in April and a fall in existing home sales showed any recovery may be further away than many had hoped.

Remarks on the US economy last week from Mr Greenspan did little to clarify the outlook.

He said the central bank would cut interest rates further if needed, but growth should recover by year-end.