Americans hit the checkout aisle last month.
Monthly spending in May rose the most in six years. It’s a strong sign that the U.S. economy is waking up from its winter hibernation and gaining momentum.
Personal consumption expenditures — a broad measure of Americans’ spending activity — rose 0.9% in May, its best monthly gain since August 2009, according to the Commerce Department.
America’s economy is driven largely by consumer spending, so when people are buying at the stores, everyone benefits. Many economists believe the consumer will lead the way for the U.S. economy’s comeback this summer.
It was a tough winter for America on a lot of levels. U.S. economic growth was actually negative (-0.2%) for the first three months of the year. Consumers largely stayed home despite cheaper gas prices.
Retail sales and spending showed lackluster progress between January and April. May’s big gain could be a sign that the consumer turning the corner.
“We are finally seeing signs of consumers beginning to spend the gasoline savings they have been sitting on since the start of this year,” wrote Paul Ashworth, chief U.S. economist at Capital Economics.
America’s economic indicators are especially important this summer because the Federal Reserve could raise interest rates in September for the first time in almost a decade. The Fed wants to see a consistent pulse in the economy before it acts.
May’s spending figure could be the beginning of a summer collage of healthier data that will allow the Fed to justify the long-awaited rate hike. A rebound in consumer spending should also help drive corporate profits up and, potentially, the stock market.
