Consumer spending in US static

CONSUMER spending in the US stagnated in June as Americans used the biggest gain in incomes in three months to boost savings, indicating a weak beginning to the second half of the year.

Household purchases, which account for about 70% of the economy, were unchanged after a 0.1% decrease in May that was previously reported as little changed, a commerce department report showed yesterday in Washington.

The median estimate in a Bloomberg survey of economists called for a 0.1% rise. Incomes rose 0.5%, lifting the savings rate to 4.4%, the highest in a year.

The results may raise concern that limited job prospects are causing Americans to pull back at the same time as business investment is cooling and the European debt crisis has triggered a slowdown in overseas markets. Federal Reserve policy makers met yesterday, and today, to determine whether more monetary stimulus is needed to shore up an economy that has slowed for two successive quarters.

“Consumers are likely to be cautious,” Yelena Shulyatyeva, a US economist at BNP Paribas in New York, said before the report.

“The labour market is poor. There is a significant deceleration in the economy.”

Projections for spending ranged from a drop of 0.1% to a gain of 0.4%. The May reading was previously reported as unchanged.

Adjusting consumer spending for inflation, which renders the figures used to calculate gross domestic product, purchases dropped 0.1%, the most since last August, after a 0.1% increase in May, yesterday’s report showed.

Spending on durable

goods, including vehicles, was unchanged after a 0.4% drop. Purchases of nondurable goods, which include petrol, decreased 0.4%. Spending on services was unchanged.

The Bloomberg survey median called for incomes to rise 0.4% in June. The 0.3% gain in May was revised up from 0.2%.

The saving rate increased from 4%. Wages and salaries climbed 0.5% after a 0.1% gain.

Disposable income, or the money left over after taxes, increased 0.3% after adjusting for inflation. It rose 0.5% in May.

The June results indicate the consumer was losing steam as the quarter drew to a close. Household spending rose 1.5% from April through June, the slowest pace in a year, commerce department data showed last week. Gross domestic product climbed at a 1.5% annual rate, cooling from a 2% pace in the first quarter. Bloomberg