Consumer spending rose again in June, marking the second straight month the economy has seen a rise. This surprised many on Wall Street because despite the increase in spending, personal incomes dropped more than expected.

Consumer spending is an aspect of the financial picture that is watched very closely because it accounts for around 70 percent of total economic activity. An increase in consumer spending for the second straight month could potentially provide a lift to the economy but this may be hard to sustain if incomes continue to fall.

The Commerce Department recently said that consumers boosted their spending 0.4 percent in June, which was slightly ahead of analysts’ estimates and this came after a 0.1 percent increase in May.

What concerns the financial world is that personal income fell 1.3 percent in June after rising by the same amount in May. During the previous month, incomes were boosted

...

Article Source: Consumers say they're gloomy, but why are they still spending? A surprising report from the Commerce Department today, which indicated that seasonally adjusted nominal sales for retail trade and food services were 1% higher in May compared with April. The new estimates of March and April sales (in red in the figure below) were also revised substantially up from the previous (blue) estimates that had been reported last month. Source: ALFRED Although a 1% monthly gain would translate into a 12% annual rate if maintained, the newly revised April numbers are still barely above the values last November in nominal terms. Calculated Risk notes that the year-on-year comparisons, when adjusted using an anticipated PCE deflator, remain negative even with the strong new estimates. Source: Calculated Risk The latest numbers ...