Personal spending climbs as expected in May

A Thanksgiving Day holiday shopper carries a discounted television to the checkout at the Target retail store in Chicago, Illinois, November 28, 2013. REUTERS/Jeff Haynes

(Thanksgiving Day holiday shopper carries a discounted television to the checkout at the Target retail store in ChicagoThomson Reuters)

Personal income rose 0.2% in May, dropping from the prior month, while personal spending climbed 0.4%, according to the Commerce Department.

Economists had forecast that personal income rose 0.3% during the month, while personal spending increased 0.4%, according to Bloomberg.

Consumer spending is starting the second quarter on a stronger footing than the first. The third estimate of first-quarter GDP released Tuesday showed that spending — which contributes to two-thirds of overall economic growth — slowed to a two-year low of 1.5%.

"The overall tone of this report was unambiguously positive, and the upbeat spending performance suggests that personal consumption activity might be back on track following the missteps earlier this year, and it points to a very strong GDP growth rebound this quarter," said TD Securities' Millan Mulraine in a note.

Personal spending in April was revised up to 1.1% from 1%.

The core personal consumption expenditures index — which excludes food and energy costs and is the Federal Reserve's preferred inflation measure — rose 0.2% month-on-month, and 1.6% year-on-year. That's still shy of its 2% target.

Lower spending on durable goods dragged overall PCE, while services surged 2.2%.

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