US consumer spending, incomes signal stable second-half start | Fin24
  • Load Shedding Schedules

    Find information for Johannesburg, Durban, Cape Town and other cities.

  • Another Rescue?

    Edcon | Is there appetite from creditors to extend another helping hand?

  • Tough Times

    SA restaurants face job cuts and possible closures as lockdown continues.


US consumer spending, incomes signal stable second-half start

Aug 31 2017 16:30
Shobhana Chandra, Bloomberg

Washington - US consumer spending increased by less than estimated in July, though rising incomes and an upward revision to June purchases put the economy on a stable footing for the second half, Commerce Department figures showed on Thursday.

Highlights of personal income and spending (July)

• Purchases rose 0.3% m/m (est. 0.4% rise) after upwardly revised 0.2% increase in June.

• Incomes rose 0.4% m/m (est. 0.3% rise), the most since February, after no change.

• Price gauge tied to consumption rose 0.1% m/m (matching est.); up 1.4% y/y (matching est.).

• Excluding food and energy, prices rose 0.1% m/m (matching est.); so-called core index was up 1.4% y/y (matching est.), lowest since 201.

Key takeaways

The steady gains in consumption, which accounts for about 70% of the economy, reflect robust hiring, healthier finances and low inflation. They also signal consumers will keep driving the expansion, though recent reports show economic growth may be broadening out to include a pickup in business investment.

Revised gross domestic product data released on Wednesday showed the economy grew at a 3% annualised pace in the second quarter, the fastest in two years and driven by consumption gains of 3.3%.

One bright spot was that wages and salaries rose 0.5% in July for a second month, the best back-to-back performance since the first two months of 2017. While real disposable incomes gained, the saving rate dipped to the lowest this year. Faster pay growth would allow Americans to ramp up their spending while also socking away more cash for the future.

The data on prices showed inflation remains stubbornly below the Federal Reserve’s 2% goal.

The central bank’s preferred inflation gauge has matched or topped policy makers’ target in just two months since 2012. While less convenient for the Fed, low price pressures help to boost consumer purchases.

Other details

• Saving rate fell to 3.5%, lowest this year, from 3.6% in June.

• Wages and salaries rose 0.5% for a second month.

• Adjusted for inflation, purchases increased 0.2% after an upwardly revised 0.2% gain.

• Household outlays on services, after adjusting for inflation, rose 0.2% for a third month.

• Spending on goods rose 0.4% after adjusting for inflation; follows 0.2% gain.

• Real disposable income, which is adjusted for taxes and inflation, rose 0.2% after no change.

SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.

Read Fin24's top stories trending on Twitter:

us  |  economy  |  consumer spending


Company Snapshot

Voting Booth

Do you support a reduction in the public sector wage bill?

Previous results · Suggest a vote