Rising incomes lead to gains in spending, savings

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June 28 (Bloomberg) — Incomes grew faster than spending in May, making it possible for American households to simultaneously increase savings and support the economic recovery.

Gains in payrolls, longer workweeks and rising pay give Americans more confidence and the means to maintain spending in coming months. The Federal Reserve’s decision last week to keep interest rates unchanged may help households weather the fallout from the European debt crisis, unemployment hovering near a 26- year high and tight credit.

“The consumer is finally starting to see some positive wage gains as the job market starts to improve,” said Omair Sharif, an economist at RBS Securities Inc. in Stamford, Connecticut. “Consumer spending isn’t going to propel the recovery forward, but it should be more than enough to sustain it. Overall, this was a fairly solid report.”

Full story: U.S. Economy: Rising Incomes Lead to Gains in Spending, Savings – BusinessWeek