RTTNews - With personal income falling by more than expected and personal spending increasing by slightly more than expected, the Commerce Department released a report on Tuesday showing a notable decline in the personal savings rate in June.

The Commerce Department said that personal income fell by 1.3 percent in June after increasing by a revised 1.3 percent May. Economists had been expecting income to decrease by about 1.0 percent compared to the 1.4 percent increase originally reported for the previous month.

Lower taxes and increased government benefit payments associated with the economic stimulus bill has contributed to the recent volatility in personal income, boosting income in May by much more than in June.

Excluding the impacts of the stimulus bill, personal income edged down 0.1 percent in June compared to a decrease of less than 0.1 percent in May.

The report also showed that personal spending rose 0.4 percent in June following a revised 0.1 percent increase in May. While the increase in spending exceeded economist estimates of 0.3 percent growth, the increase in spending in May was revised down from 0.3 percent.

Although spending increased for the second consecutive month, it remains down 2.2 percent compared to the same month a year ago. Spending has been down on an annual basis every month since December.

As mentioned above, the drop in income combined with the monthly increase in spending caused the personal savings rate slip to 4.6 percent in June from 6.2 percent in May. Nonetheless, the savings rate remains well above the levels seen in recent years.

Commenting on the data, Peter Boockvar, equity strategist for Miller Tabak, said, Bottom line, spending remains punk and a tough labor market isn't helping.

Also, a change in the savings habits of Americans will keep a lid on spending that will hopefully be offset by exports and business investment, Boockvar added.

The Commerce Department also said that its closely watched reading on core consumer prices showed a slowdown in the pace of price growth.

Core prices, which exclude food and energy prices, rose at an annual rate of 1.5 percent in June compared to the 1.6 percent growth seen in May.

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