Page last updated at 20:37 GMT, Friday, 27 June 2008 21:37 UK

US consumer spending rises in May

Wal Mart shoppers
US economic stimulus package has made households a little richer

US consumer spending rose 0.8% in May as Americans cashed in on the government's $145bn (74bn) economic stimulus package.

The Commerce Department said the rise in spending was higher than the 0.7% economists had forecast and the largest rise since November.

The boost was down to the emergency fiscal boost announced in January to try avoid a recession in the US.

But analysts warned the impact of the stimulus plan may be short lived.

Cautious consumers

Disposable income also jumped 5.7% last month, while Americans put away more of their money, the Commerce Department said.

But what's going to happen in July and August, when we don't have the help from the stimulus checks
Hugh Johnson, Johnson Illington Advisors

The rate of personal savings jumped to 5% last month, the highest reading in more than a decade.

Some economists estimate that increased spending could double the rate of economic growth in the second quarter.

But as consumers have become more cautious about their finances, the worry is that they will keep the money in the bank, analysts warned.

"They're saying that's great, but what's going to happen in July and August, when we don't have the help from the stimulus checks," said Hugh Johnson, chief investment officer of Johnson Illington Advisors.

The government announced its fiscal plan worth around $145bn (74bn) in January as the economy weakened and energy prices soared.

The bulk of the money arrived in May, but that will start to dry up by the middle of July.

Meanwhile, consumer confidence fell to 50.4 this month, the lowest level since February 1992, according to the Conference Board.

Analysts blame the property slump and rising prices for food and fuel.


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