Personal income and spending expanded modestly again in May at a pace that assures second quarter consumer spending will grow faster than in the last two weak quarters.

But you have to look deep into the Commerce Department report to find this, says Jim Haughey, Newport Communications’ senior economist.
"Measured in current dollars, consumer spending rose only 0.1% in both April and May. But prices are falling, especially for energy. So the spending rise was 0.3% in both months after deflation. That is enough to push the 2nd quarter consumer spending growth rate to 2.6% at an annual rate from about 1.8% for the previous six months."
Another 0.3% rise in June would lift the growth rate for the quarter to 3.0%, Haughey says. The faster spending growth is supported by a rise in real disposable income by 0.4% in both April and May.
"It is sustainable and not dependent on borrowing," Haughey says. "Also the spending mix has turned more favorable for freight. It has tilted back toward non-energy goods and away from energy goods and services in the last few months as energy prices declined."