WASHINGTON-Americans curbed their spending increases in June, a sign that weak wage growth might be weighing on consumers.
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Personal consumption expenditures increased 0.2%, the smallest in four months, compared to a downwardly revised 0.7% jump in May.
Personal income rose 0.4 percent for the third month in a row in June. Americans bought fewer vehicles in June after snapping up new autos in May at the highest pace since the recession ended more than six years ago.
Economists didn’t appear too concerned about the June spending slowdown. In June, spending on long-lasting goods such as automobiles fell 1.3 per cent, reversing the prior month’s increase.
Since incomes grew faster than spending, the amount of money individuals save climbed to 4.8% from 4.6%. “An increase in aggregate hours worked is expected to have supported a modest gain in personal income”.
Economists surveyed by The Wall Street Journal had expected a 0.2% increase in consumer spending and a 0.4% increase in personal income.
An inflation gauge closely watched by the Federal Reserve rose by 0.1 per cent in June, the same as in May.
Excluding food and energy, which can be volatile, so-called “core” PCE prices rose 1.3 percent for the sixth consecutive month, still well below the Fed’s 2.0 percent target for price stability.
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Through the first six months of this year, the economy has grown a modest 1.5 percent but economists believe solid gains in employment will likely double that growth figure to around 3 percent in the second half of the year. That was better than a 0.6 percent expansion in gross domestic product in the first quarter. The Federal Reserve last week described the economy as expanding “moderately”, upgraded its view of the labor market and said housing had shown “additional” improvement. But Fed officials kept a key borrowing rate at a record low near zero, where it has been for nearly seven years. Fed officials have said they want to be ” reasonably confident” that inflation is moving back towards the 2% level before they raise rates.
