Consumer spending grows solidly

Household purchases post fourth straight healthy advance in June.

An increase in Americans’ spending in June highlighted strength in the biggest part of the U.S. economy on the back of steady income growth and elevated confidence. The Federal Reserve’s preferred measure of inflation, while not accelerating, exceeded its goal on an annual basis for the third time in four months.

The firmer price data and resilient spending and wage growth will likely keep U.S. central bankers on the path of gradual interest rate increases. No hike is expected after this week’s meetings. Here are the details released Tuesday.

Household purchases posted a fourth-straight solid advance in June, climbing 0.4 percent after an upwardly revised 0.5 percent gain, according to Commerce Department figures. Incomes also rose 0.4 percent in June, matching the May increase. Previously released data had already shown that consumption, which accounts for about 70 percent of the economy, was in solid shape last quarter, and the latest monthly details reaffirmed that this driver of growth was on firm ground entering the second half of 2018.

The Commerce report also showed the Fed’s preferred inflation gauge — tied to consumption — rose 0.1 percent after the previous month’s 0.2 percent gain. It rose 2.2 percent on a year-over-year basis, the same as in May. Excluding food and energy, so-called core prices climbed 0.1 percent from the previous month and were up 1.9 percent from June 2017, just short of a 2 percent median projection in the Bloomberg survey.

Firmer inflation may limit faster advances in workers’ wherewithal to spend even as lower taxes are helping them.

The Commerce figures showed disposable income, or earnings adjusted for taxes and inflation, rose 0.3 percent in June, the most since March.

A separate report from the Labor Department indicated employers are offering better compensation packages amid an ongoing shortage of qualified workers. The employment cost index rose 2.8 percent in the second quarter from a year ago, the biggest jump since the third quarter of 2008 and a fresh high for this expansion. Wages and salaries climbed 2.8 percent yearover-year, also the most since 2008. Benefits costs advanced 2.9 percent, the largest gain since late 2011.

The reports are in sync with the view that worker pay has been only slowly advancing even as hiring remains strong and unem-

ployment hovers near the lowest rate since 1969.

Americans’ confidence increased modestly in July, with the New York-based Conference Board’s index edging up to 127.4, from 127.1 in June. The present conditions measure jumped to a 17-year high amid robust readings on the economy and the labor market. Their expectations, however, deteriorated for a second straight month, perhaps an indication of concern about the implications of trade policy on the economy.

Home prices are coming off the boil, according to S&P CoreLogic Case-Shiller data that showed an index of values in 20 U.S. cities rose 6.5 percent in May from a year earlier, after a 6.7 percent gain.

The national home-price gauge advanced 6.4 percent year-over-year for a second month. While both measures eased, prices remain elevated due to steady demand and a shortage of affordable properties.

Meanwhile, manufacturing continues to expand at a rapid clip entering the second half of this year. The MNI Chicago Business Barometer, which economists often use to gauge factory activity in the upper Midwest, unexpectedly improved to a sixmonth high of 65.5 in July.

Measures of orders, production and employment accelerated, while a gauge of inventories dropped in a sign production will remain robust.

The report is consistent with other July data showing solid expansion at Texas factories and faster manufacturing growth in the Milwaukee area.