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US consumer spending up as saving hits new highs

US consumer spending rose moderately in May even as savings touched the highest level in eight months, suggesting a tepid economic recovery was still intact.

The data yesterday helped to allay fears that consumers, key to reviving the economy following the longest and deepest slump in 70 years, were retreating.

“Consumers are spending at a reasonably solid pace, but are still conservative. With two months of the (second) quarter in hand, consumers are at roughly the same pace of spending growth as we saw in the first quarter,” said Julia Coronado, an economist at BNP Paribas in New York.

Spending increased 0.2 per cent after being flat in April, the Commerce Department said.
That was a touch above market expectations for 0.1 per cent. Adjusted for inflation, spending was up 0.3 per cent.

Investors, however, continued to worry about the recovery’s strength. A string of recent data, including a report showing retail sales had slumped in May, implied it was slackening.