US consumer spending increases 0.3 percent in July
The US economy appears strong as data shows consumer spending increased in July.
Spending among American consumers increased 0.3 percent last month, according to A Commerce Department 聽released聽Friday. The 0.3 percent increase is below economists鈥� predictions of a 0.4 percent jump for July, but followed closely behind the revision of June data up to a 0.3 percent increase. The back-to-back months of gains bodes well for the US economy.聽
Consumer spending constitutes more than two-thirds of economic activity in the US. An increase shows upward momentum and displays the strength necessary to shrug off recent trouble in the Chinese market, experts say.
The good news arrived at just the right time, following a tumultuous week for the US stock market. As concerns over China鈥檚 economy created market fluctuations, the US stock market was sent into correction. The Dow and Nasdaq only just recovered from correction territory on Thursday.
The 0.3 percent increase will likely impact decisions to be made by the Federal Reserve. The Fed looked favorably toward a September interest rate hike before the market collapse. Following the collapse, William Dudley, president of the New York Federal Reserve, said that factors were not as favorable for a September hike as they had been, but 鈥渃ould become more compelling鈥� as we get additional information on how the US economy is performing鈥�.鈥� The July 0.3 percent increase could be that information.
The consumer spending increase can be attributed primarily to spending on durable goods. In June, the category dropped 1.1 percent but was reversed in July with around a 1.1 percent increase. About half the gain came from the automotive industry and an increased demand for automotive vehicles and parts. Spending on non-lasting goods rose only .1 percent.
The increase in consumer spending is accompanied by an increase in personal income and wages and salaries.
Personal income grew 0.4 percent in a July, and wage and salary gains arrived at 0.5 percent. The income increase was predictable, as it has increased the last four months; however, the wage and salary increase last month was the largest since November 2014. As income growth increased, the savings rate also rose 0.2 percent to 4.9 percent.
Prices also went up in July, a slight 0.1 percent. Food prices went up 0.2 percent, and 聽with electricity costs edged up, with a 0.1 percent rise in energy prices. Even with price increases, the outcome is still good for consumers.
IHS Global Insight Economist Chris Christopher noted in his analysis: 鈥淭he real consumer spending outlook for the remainder of the year looks relatively bright, supported by improved job prospects, solid gains in real disposable income and household real estate assets, and a housing market that is gaining traction.鈥�
