Gross domestic product expanded at a 1.2% annualized rate from April through June, less than projected after a first-quarter gain of 0.8% that was also lower than previously reported, Commerce Department data showed last week.
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The report said personal spending climbed by 0.4 percent in June, matching the increase seen in May. In spite of buoyant consumer expenditure, the Commerce Department on Tuesday reported that inflation is still largely suppressed in the United States economy.
When adjusted for inflation, consumer spending rose 0.3 per cent after climbing 0.2 per cent in May.
“As the earliest reliable indicator of durable goods consumption, today’s sales results bode well for real July consumption growth”, said Jesse Hurwitz, an economist at Barclays in NY. Despite the possibility that a strong growth pace in consumer spending will not be maintained in the second quarter, analysts remain optimistic that consumer spending will stay striving as it will be supported by the slowly growing wages as the labour market tightens, coupled with the growing housing and stock market prices.
Meanwhile, the Commerce Department said personal income edged up by 0.2 percent for the second straight month. The June figures underscore momentum heading into the third quarter after household spending grew in the previous three months by the most since 2014.
“Another decent quarter for consumers, together with renewed inventory building, should anchor a near doubling in real GDP growth in the third quarter”.
The personal-consumption expenditures price index, the Federal Reserve’s preferred inflation measure, increased 0.1% in June from the prior month.
Core PCE prices, which exclude food and energy prices, also ticked up by 0.1 percent after edging up by 0.2 percent for two consecutive months. It has risen by the same margin since March.
Monetary policy makers at the US Federal Reserve, whose decisions influence markets around the world, have cited persistently low inflation in forestalling interest rate hikes.
With spending up in June at a faster pace than incomes grew, the saving rate slipped to 5.3 percent of after-tax income, down from 5.5 percent in May.
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American consumers turned in another strong month of spending in June despite a decline in spending on autos. Spending had been expected to rise by about 0.3 percent. Spending on services increased 0.5 percent, but outlays on long-lasting manufactured goods such as automobiles fell 0.3 percent. With spending outpacing income, savings fell to $732 billion, the lowest level since March 2015. After the numbers were released, several analysts said the number suggest the USA economy should see solid growth through the end of the year.
