Consumer spending in U.S. rose 5.6% in June

Resurgent virus could hamper gains going forward.

WASHINGTON — American consumers increased their spending in June by a solid 5.6%, helping regain some of record plunge that occurred after the coronavirus struck hard in March and paralyzed the economy. But the virus’s resurgence in much of the country could impede further gains.

Last month’s rise in consumer spending followed a seasonally adjusted 8.5% surge in May after spending had plunged the previous two months when the pandemic shuttered businesses, caused tens of millions of layoffs and sent the economy into a recession.

Now, with confirmed viral infections rising in a majority of states, many businesses have had to pause their reopenings or close a second time and cut jobs, thereby putting consumers under renewed pressure. The number of laid-off Americans who have applied for unemployment benefits has topped 1 million for 19 straight weeks.

Friday’s Commerce Department report showed that the June increase in consumer spending coincided with a 1.1% drop in personal incomes, which followed an even bigger 4.4% fall in incomes in May. Those sharp declines followed a 12.1% surge in incomes in April as a flood of government aid began to be distributed. The $1,200 checks have been largely spent, though, and the $600 in unemployment benefits expired Friday.

And recent patterns suggest that consumers have reduced their spending in the past couple of weeks. JPMorgan Chase, which tracks total spending by its 30 million debit and credit card holders, notes that as of July 20, their spending had dropped to a five-week low.

TONY DEJAK / ASSOCIATED PRESS Friday’s Commerce Department report showed June’s increase in consumer spending coincided with a 1.1% drop in personal incomes, which followed an even bigger 4.4% fall in incomes in May.