Personal Income Up 0.4%; Spending Increases 0.2%

WASHINGTON — Personal consumption increased 0.2% in May and incomes rose 0.4% as core consumption posted its largest gain in seven months, the Commerce Department reported yesterday.

Core consumption, which excludes food and energy costs, was up 0.2% for the month, the largest core increase since October. Core expenditures for the year ending in May increased 1.3%.

Economists expected personal and core personal consumption expenditures to each rise 0.1%, according to the median estimate from Thomson Reuters. PCE was flat in April, unrevised from the initial estimate last month.

Incomes in April were revised upward to 0.5% from an initial gain of 0.4% — the largest monthly increase in a year. Economists forecast 0.5% growth in incomes.

The report suggests consumer balance sheets are healing, said Diane Swonk, chief economist of Mesirow Financial.

“However, much of the deleveraging continues to come from a high rate of defaults,” Swonk wrote in a research note. “The adjustment for the U.S. consumer has just begun.”

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