June 26 (Bloomberg) -- Consumer spending in May rose for the first time in three months as incomes jumped by the most in a year, showing government efforts to revive the economy may be starting to pay off.
The 0.3 percent gain in purchases followed no change in April, the Commerce Department said today in Washington. Incomes surged 1.4 percent, the most since May 2008, driving up the savings rate to the highest level in more than 15 years.
Incomes surged? All of this can be attributed to a one-time transfer for seniors as part of the stimulus package. Wages were down. What are people doing with this money? Paying down debt (gee, told you so?) as the savings rate rises at break-neck speed. The data purports the gains in GDP are in fact deficit driven (as Keynesians think maybe, just maybe, they have a chance of being right one time in history). Debt to pay down debt, great. Imho, the personal savings rate will go north of 10% (easily) just to reach a reasonable mean. Therefore you can expect it to overshoot that mean for some time. Put that in your stimulus-pipe and smoke it.
