Consumer spending, factory orders rise in June

Tuesday, Aug. 2, 2005 | 11:22 a.m.

Americans earned and spent more in June as the job market improved and automakers enticed consumers with discounts. Factory orders also rose, adding to evidence the economy is building momentum.

Personal incomes rose 0.5 percent, more than twice the gain in May, and spending increased 0.8 percent after no change the previous month, the Commerce Department said today in Washington. A measure of inflation in the report unexpectedly held steady. Factory orders increased 1 percent in the June, the fourth straight increase, the department said separately.

"Consumers are really on a bit of a tear," said David Resler, chief economist at Nomura Securities International Inc. in New York. "These are very strong numbers and they bode well for the near-term economic outlook."

Americans flocked to automobile showrooms in June as General Motors Corp. offered employee-price discounts to all customers, and purchases kept up the pace in July as rivals matched the offer. The jobless rate dropped to an almost four-year low in June and a report in three days may show that hiring accelerated last month, ensuring that people keep spending even with gasoline prices at a record, economists said.

Strong consumer demand gave companies the confidence to order more machines and computers. June's gain in factory orders followed a revised 3.6 percent increase in May that was larger than the department first reported. The 1 percent rise matched the forecast of 60 economists in a Bloomberg News survey.