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May incomes surge, but savings outpace spending

WASHINGTON — Households pushed their savings rate to the highest level in more than 15 years in May as a big boost in incomes from the government's stimulus program was devoted more to bolstering nest eggs than increased spending.

The Commerce Department said today consumer spending rose 0.3 percent in May, in line with expectations. But incomes jumped 1.4 percent, the biggest gain in a year and easily outpacing the 0.3 percent increase economists expected.

The savings rate, which was hovering near zero in early 2008, surged to 6.9 percent, the highest level since December 1993.

The income increase reflected temporary factors relating to the $787 billion economic stimulus program President Barack Obama pushed through Congress in February to fight the recession. That program included one-time payments to people receiving Social Security and other government pension benefits.

The stimulus package also featured reductions in payroll tax withholding designed to get people to start spending more money and boost the economy. Those factors helped increase after-tax incomes 1.6 percent in May. However, without the special factors, after-tax incomes would have risen just 0.2 percent.

The savings rate, which is a percentage of disposable income, rose to 6.9 percent from 5.6 percent in April.

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