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Consumers spending more, but not enough

Americans are spending more, but not enough to speed along economic recovery.

According to the U.S. Commerce Department, consumer spending rose 0.2 percent in May, after no change in April. Incomes jumped for the sixth time in seven months, boosting household finances and potentially providing for greater future spending.

However, the Associated Press also reported that money spent on goods, declined. The increase came from spending on services, for instance using more electricity as the weather has begun to warm up.

“Consumers are still not setting this economic recovery alight, but nor are they rolling over in the face of high unemployment and lower stock prices,” said Paul Dales, an economist at Capital Economics.

Consumer spending accounts for about 70 percent of all economic activity. Yet, consumers are still cautious as they continue to deal with high unemployment, tight credit and a slumping housing market. If consumption remains slow, the economy may not grow fast enough to create jobs and quickly bring down the national unemployment rate of 9.7 percent.

Earlier this month, the government said that retail sales fell sharply last month, an indication that consumers were cutting back.


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