The nation's consumer spending rebounded in May and personal income posted its best increase in three months. Such data suggest that the U.S. economy has shifted to modestly firmer ground, as the opening half of 2013 concludes.
Specifically, the Commerce Department said that personal consumption expenditures had risen by 0.3% last month, after falling by a downwardly revised 0.3% rate in April. That metric had previously been estimated to have contracted by 0.2% in April. The latest spending figure was in line with expectations. At the same time, Commerce intoned that personal income rose by 0.5% last month, the largest gain since February. This improvement followed a nominal uptick of 0.1% in April.
Such data, meanwhile, support the contention by the Fed that the downside risks to the economy had lessened in recent months. That would seem to be the principal reason that the lead bank appears to be leaning toward possibly reducing the magnitude of its bond-buying efforts, and perhaps as early as the end of this year.
Also, these figures, along with corresponding figures for housing starts and home sales, orders for durable goods, surveys on consumer confidence, and metrics on business investment suggest that perhaps the rate of economic improvement in the fast-ending quarter might not have been as feeble as some were just recently suggesting. Our take on this possibility is that we sense that the nation's second-quarter GDP will increase in line with the downwardly revised first-quarter gain of 1.8%.
Moreover, we also think that growth will then step up a bit more in the second half, with GDP likely moving up into the 2% increase range, or slightly higher. Such a performance would only make the Fed more apt to start reining in its historically generous monetary stimulus.At the time of this article's writing, the author did not have positions in any of the companies mentioned.