U.S. Consumer Spending Stayed Solid in June
(Bloomberg) -- U.S. consumer spending posted a fourth-straight solid advance in June, fueled by steady income growth and underscoring strength in the biggest part of the economy. Inflation, meanwhile, topped estimates.
Purchases, which account for about 70 percent of the economy, rose 0.4 percent after a revised 0.5 percent advance that was larger than previously estimated, Commerce Department figures showed Tuesday. Incomes also climbed 0.4 percent in June, matching the May increase. The Federal Reserve’s preferred measure of inflation rose 2.2 percent on a year-over-year basis for a second month.
The results are in sync with data reported last week that showed a solid labor market, lower taxes, and improving finances buoyed consumer purchases, driving an acceleration in second-quarter economic growth. A core measure of inflation stayed within striking distance of the Fed’s 2 percent goal, though a touch shy of the median projection.
The Fed’s preferred inflation gauge -- tied to consumption -- rose 0.1 percent after the previous month’s 0.2 percent gain. June’s year-over-year increase marked the third month in the last four that this measure exceeded the central bank’s goal.
Excluding food and energy, so-called core prices also climbed 0.1 percent after a 0.2 percent gain. The core was up 1.9 percent from June 2017 and compared with a 2 percent median projection.
Even with the latest firmer price data and signs of resilience in spending and growth, Fed policy makers are likely to stay on the path of raising interest rates gradually. However, no hike is expected when officials gather Tuesday and Wednesday in Washington.
The economy expanded at a 4.1 percent annualized rate in the second quarter, the fastest since 2014, with consumption rebounding to a 4 percent pace, according to data released on July 27.
Wages and salaries increased 0.4 percent in June, the data showed. Disposable income, or earnings adjusted for taxes and inflation, rose 0.3 percent, the most in three months, after a 0.2 percent gain.
Workers’ paychecks have been slow to show sustained progress even with hiring remaining strong and an unemployment rate that’s hovering near the lowest since 1969. While lower taxes are helping, the pickup in inflation is acting as a hurdle.
The June report also showed the saving rate held at 6.8 percent. That’s in line with comprehensive revisions issued last week that revealed Americans have been socking away more money in recent years than had been earlier thought.