U.S. Consumer Spending, Incomes Signal Stable Second-Half StartBy
U.S. consumer spending increased by less than estimated in July, though rising incomes and an upward revision to June purchases put the economy on a stable footing for the second half, Commerce Department figures showed Thursday.
Highlights of Personal Income and Spending (July)
The steady gains in consumption, which accounts for about 70 percent of the economy, reflect robust hiring, healthier finances and low inflation. They also signal consumers will keep driving the expansion, though recent reports show economic growth may be broadening out to include a pickup in business investment.
Revised gross domestic product data released Wednesday showed the economy grew at a 3 percent annualized pace in the second quarter, the fastest in two years and driven by consumption gains of 3.3 percent.
One bright spot was that wages and salaries rose 0.5 percent in July for a second month, the best back-to-back performance since the first two months of 2017. While real disposable incomes gained, the saving rate dipped to the lowest this year. Faster pay growth would allow Americans to ramp up their spending while also socking away more cash for the future.
The data on prices showed inflation remains stubbornly below the Federal Reserve’s 2 percent goal. The central bank’s preferred inflation gauge has matched or topped policy makers’ target in just two months since 2012. While less convenient for the Fed, low price pressures help to boost consumer purchases.
- Saving rate fell to 3.5 percent, lowest this year, from 3.6 percent in June
- Wages and salaries rose 0.5 percent for a second month
- Adjusted for inflation, purchases increased 0.2 percent after an upwardly revised 0.2 percent gain
- Household outlays on services, after adjusting for inflation, rose 0.2 percent for a third month
- Spending on goods rose 0.4 percent after adjusting for inflation; follows 0.2 percent gain
- Real disposable income, which is adjusted for taxes and inflation, rose 0.2 percent after no change
— With assistance by Jordan Yadoo