Consumer spending jumps as stimulus checks land

By Alister Bull

WASHINGTON (Reuters) - U.S. consumer spending jumped last month as government stimulus checks boosted household budgets and pushed the saving rate to a 13-year high, but another report released on Friday showed confidence took a hit.

Commerce Department data showed U.S. personal spending rose by a greater-than-expected 0.8 percent in May, while a key gauge of inflation remained muted.

Some economists said the stronger spending would double the pace of U.S. growth in the second quarter from what they had been predicting before the data. There is a big question mark, however, over whether this will be sustainable.

These concerns were reinforced a short while later by the Reuters/University of Michigan Surveys of Consumers, which hit another 28-year low in June of 56.4 from May's 59.8 reading. It also showed elevated household expectations for inflation.

The Federal Reserve stepped up its warnings on inflation on Wednesday when it halted a powerful interest rate-cutting campaign, which has slashed rates by 3.25 percentage points to 2 percent since September to shield U.S. growth from a housing slump.

Wall street stocks suffered after oil topped $142 per barrel and closed lower, with the Dow Jones industrial average .DJI surrendering almost 107 points to end at 11,347.

U.S. government debt prices rose, benefiting from the drubbing of Wall Street stocks, while the dollar lost ground against the yen and Swiss franc on worries about growth.

Personal spending -- under scrutiny as a barometer of how consumers behaved as they received a fiscal boost of $48 billion in May amid a cooling economy -- had been expected to increase 0.6 percent, according to analysts polled by Reuters.