US spending weakens


US dollarUS consumer spending sputtered in July amid weak income growth, according to Commerce Department data that raised questions about the strength of the economy.

The disappointing report, after a series of negative economic data, came amid speculation that the Federal Reserve will begin reeling back its stimulus program soon.

Consumer spending, the main growth driver in the US economy, edged up only 0.1 per cent in July, the Commerce Department reported.

That came in well below the strong June growth of 0.6 per cent, revised upward from an initial 0.5 per cent estimate.

Personal income also rose only 0.1 per cent in July, slowing from June’s growth of 0.3 per cent.

Wages and salaries, the main factor in personal income, fell 0.3 per cent in July after rising 0.4 per cent in June.

The monthly consumer spending figure was much weaker than the 0.3 per cent consensus forecast; the income reading matched analyst expectations.

“The consumption and income numbers add to a roster of weaker than expected July data,” Barclays analyst Peter Newland said.

“Taken alongside declines in capital goods shipments and new home sales and the soft tone to the July employment report, a picture of a loss of momentum at the start of Q3 seemingly becomes apparent, something our GDP tracking estimate captures: our Q3 estimate now stands at just 1.6 per cent.”

Second-quarter US economic growth on Thursday was revised upward to an annual rate of 2.5 per cent, up from an initial estimate of 1.7 per cent.

Consumer prices continued to rise just slightly in July as the economy slowly recovers from the Great Recession that ended four years ago.

The price index for personal consumption expenditures ticked up 0.1 per cent in July.

The closely watched core PCE prices, excluding food and energy, rose 0.1 per cent, half the increase of the previous month.

Compared with a year ago, the key core price index was up 1.2 per cent, well below the Federal Reserve’s 2.0 per cent target.


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