People are still spending more money

Despite the fact that much of the month of May was filled with grim economic forebodings, personal spending still grew 0.2%.  This data from the Commerce Department was also accompanied by data showing that consumer spending grew 3% in the first quarter.  Still more data demonstrated that the personal savings rate was 4.0%.  That rate compares to a pre-recession savings rate of 1.7%.

Analysis: While personal spending was clearly muted in May, remember that the month experienced a 10% drop in the stock market based on fears of an impending European “double-dip” recession.  That consumer spending was still up despite the stock market fall, is encouraging.

Additionally, if you go back to the wee beginnings of this blog you would see that I was hoping that the recession would cure the U.S. consumer of his and her debt spending.  I hoped that consumers would learn how to save money, rather than spend it.  Why?  Because a net negative spending nation cannot survive beyond a single generation.  The U.S. at some point had to start earning more than it spent.  While clearly a long-term positive outcome, in the short-term it would mean that the economic recovery would be slow.

Recall too, that I held similar hopes for U.S. businesses.  Well at this juncture it appears that is exactly what is happening.  All of which combined means that economic growth for the foreseeable future will be slower than our collective memories are used to, but that will be less artificial and more real.  That is, not debt driven, phantom economic growth.

A part of why economic pundits, and investors, are fearful of these economic data is an unexpressed expectation that the economy look like it did over the past 15 years.  I just don’t think that is going to happen.  However, the good news is that U.S. businesses are slowly getting more competitive and labor markets are slowly improving.

Importance grade: 8; given the shocking decline in the stock market in May, that personal spending was up at all is encouraging.

Jason