Yesterday’s personal income and spending report for May matched expectations on the income side of the ledger but fell short of the consensus forecast for consumption. Some analysts warn that the surprisingly weak growth rate for spending last month (+0.2% vs. the consensus forecast of +0.4%) casts a shadow over the projected snapback in second-quarter GDP. But focusing on the monthly income and spending data can be misleading–especially if we’re looking at one monthly release. By contrast, the year-over-year changes offer a more reliable measure of the trend and by that yardstick the latest release offers another round of modest encouragement.
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