WASHINGTON U.S. factory activity slipped in July and consumer spending advanced at its slowest pace in four months in June, indicating that the economy had lost some momentum recently.
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While a robust personal consumption expenditure (PCE) figure of 2.9% annualized for the second quarter was already telegraphed in last Thursday’s GDP report, the monthly pattern is somewhat less constructive for third quarter growth than previously thought, with the 0.2% nominal and flat real gain in PCE in June being the weakest since February.
In May, personal spending jumped 0.9% to the strongest level in nearly six years. The increase had been driven by heavy spending on cars. But in June, vehicle sales slowed.
Excluding the volatile food and energy categories, core prices climbed 0.1% from May and 1.3% from a year earlier. Incomes climbed 0.4 percent for a third month. While consumer spending generally has been solid this year, tepid average wage growth has caused it to be choppy despite low gasoline prices and improved household finances.
Consumer spending in June was restrained by a decline in auto purchases. The government will report on July employment on Friday. The 0.2% advance was the smallest in data going back to 1982 and followed a 0.7% increase in the first quarter, the Labor Department said on Thursday.
The data showed that after adjusting for inflation, in order to generate the figures used to calculate gross domestic product, purchases were little changed in June after a 0.4 percent gain in May.
The improvement in consumer spending was the biggest factor boosting overall economic growth to 2.3 percent in the second quarter.
Personal saving rate continued rising in the month, reflecting consumers’ caution in spending.
The expectation is that spending rose 0.2 percent, according to a survey of economists by data firm FactSet.
Disposable income, or the money remaining after taxes, rose 0.2 percent in June from the prior month after adjusting for inflation.
Fed officials are paying especially close attention to the labour market and to inflation as they consider raising short-term interest rates from near zero, where they have stayed since 2008.
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Some economists consider the top increase will happen for the next Fed keeping up with on September 16overvallen17, while other advisors believe there is a good chance that it could be December before Fed officers start feeling certain…
