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US consumer spending edges up; income held back by drop in dividends
[WASHINGTON] US consumer spending barely rose in June as personal income failed to increase for the first time in seven months amid a decline in dividend payments, pointing to a moderate pace of consumption growth in the third quarter.
The Commerce Department said on Tuesday that consumer spending, which accounts for more than two-thirds of US economic activity, edged up 0.1 per cent in June after an upwardly revised 0.2 per cent gain in May.
There was also little sign of inflation. The personal consumption expenditures (PCE) price index, excluding food and energy, rose 0.1 per cent in June after a similar gain in May. In the 12 months through June, the so-called core PCE price index increased 1.5 per cent after advancing by the same margin in May.
The core PCE is the Federal Reserve's preferred inflation measure. The US central bank has a 2 per cent target.
The data was included in the second-quarter gross domestic product report published last week. That report showed consumer spending increasing at a 2.8 per cent annualised rate, which accounted for the bulk of the economy's 2.6 per cent growth pace during the quarter.
US stock index futures pared gains slightly after the data while the US dollar held gains. Prices of US Treasuries were trading lower.
The increase in consumer spending in June was in line with economists' expectations. Consumer spending was previously reported to have gained 0.1 per cent in May.
When adjusted for inflation, consumer spending was unchanged after rising 0.2 per cent in May. June's flat reading likely sets consumer spending on a moderate growth path in the third quarter.
Since accelerating at a 3.8 per cent pace in the second quarter of 2016, consumer spending growth has remained below a 3.0 per cent rate, restrained by sluggish wage gains.
In June, personal income was unchanged. That was the weakest reading since a 0.1 per cent dip in November 2016 and followed a 0.3 per cent increase in May.
Wages and salaries increased 0.4 per cent in June. Personal dividend income declined 3.0 per cent in June after surging 4.8 per cent in May. Income at the disposal of households after accounting for inflation fell 0.1 per cent, the largest decrease since last December. Savings slipped to US$546.4 billion in June from US$564.7 billion in May.