Con­sumer spend­ing rises in July; in­fla­tion muted

The Pak Banker - - BUSINESS -

WASHINGTON: US con­sumer spend­ing picked up a bit in July as house­holds bought more au­to­mo­biles, of­fer­ing fur­ther ev­i­dence of strength in the econ­omy that could keep the door open to a Fed­eral Re­serve in­ter­est rate hike this year.

The Com­merce Depart­ment said on Fri­day con­sumer spend­ing in­creased 0.3 per­cent af­ter an up­wardly re­vised 0.3 per­cent rise in June. Con­sumer spend­ing, which ac­counts for more than two-thirds of U.S. eco­nomic ac­tiv­ity, was pre­vi­ously re­ported to have gained 0.2 per­cent in June. Econ­o­mists polled by Reuters had forecast con­sumer spend­ing ris­ing 0.4 per­cent last month.

It was the latest re­port in­di­cat­ing mo­men­tum in the econ­omy as it con­fronted re­cent global fi­nan­cial mar­kets tur­bu­lence, sparked by con­cerns over a slow­ing Chi­nese econ­omy, which has di­min­ished the chances of an in­ter­est rate in­crease next month. Econ­o­mists say that un­der­ly­ing strength, also high­lighted by a re­bound in busi­ness spend­ing, buoy­ant hous­ing and la­bor mar­kets, as well as bullish con­sumer con­fi­dence, gives the econ­omy mus­cle to weather the fall­out from the mar­kets rout. The fairly up­beat con­sumer spend­ing re­port also sug­gested the econ­omy main­tained some of its vigor from the sec­ond quar­ter, when it ex­panded at a 3.7 per­cent an­nual rate. Last month, spend­ing on long-last­ing goods such as au­to­mo­biles in­creased 1.1 per­cent, re­vers­ing June's 1.1 per­cent drop. Auto pur­chases ac­counted for about half of the in­crease.

Out­lays on ser­vices like util­i­ties rose 0.2 per­cent. When ad­justed for in­fla­tion, con­sumer spend­ing rose 0.2 per­cent af­ter be­ing flat in June. Per­sonal in­come in­creased 0.4 per­cent in July, ris­ing by the same mar­gin for a fourth straight month. Wages and salaries shot up 0.5 per­cent, the largest rise since Novem­ber 2014, af­ter ad­vanc­ing 0.2 per­cent in June. With in­come gains out­pac­ing spend­ing, the sav­ing rate in­creased to 4.9 per­cent from 4.7 per­cent in June. De­spite the steady in­crease in con­sump­tion, in­fla­tion re­mained muted. In­fla­tion, which has per­sis­tently run be­low the Fed's 2 per­cent tar­get, dom­i­nated the dis­cus­sions at the Fed's July 28-29 pol­icy meet­ing. A price in­dex for con­sumer spend­ing rose 0.1 per­cent, slow­ing from a 0.2 per­cent in­crease the prior month. In the 12 months through July, the per­sonal con­sump­tion ex­pen­di­tures (PCE) price in­dex rose 0.3 per­cent for a sec­ond straight month.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.