Americans dipped into savings and used their fatter paychecks to buy new cars, electronic gadgets and other durable goods in May, according to recent Department of Commerce data. Despite greater optimism about the economic recovery, they continue to temper apparel spending, as discounts, coupons and other deals prevail in virtually every corner of the market.
Total after-tax income increased by 2.2%, its biggest gain in five months. Personal consumption expenditures grew by 2.9%, slightly above April’s 2.4% rate.
Durables spending surged by 6.7%, driven by an acceleration in automobile purchases. Now that the economic recovery seems to be fully underway, many Americans are replacing their aging vehicles with new, more fuel-efficient cars, SUVs and small trucks. Sales of sporting equipment, guns, games and electronic products have also seen healthy increases.
Personal savings topped $388 billion in May, their highest level in five months, though a 15% drop from the same month last year. The personal savings rate stands at about 3.2% of disposable income, slightly above last month’s level but well below 2012’s average monthly savings rate of over 4%.
Although consumers have stopped deleveraging, or paying down debt, they haven’t increased credit card use very much. Revolving credit debt increased by only 1% in May. Total consumer debt, which includes mortgage balances and student loans, increased by almost 6%, however.
Although growth in consumption of apparel and footwear has been declining over the past few months, and now lags overall spending growth, it’s relatively healthy compared to spending on other nondurables.
Apparel and footwear expenditures rose by 3% on a 12-month smoothed basis in May, its smallest monthly increase in almost three years. Spending on footwear, a category that has enjoyed tremendous visibility over the past several months, also appears to be slowing, and now lags apparel spending on a 12-month smoothed basis.
Women’s apparel spending growth was 3.5% in May, edging ahead of both men’s and children’s for the month.