You are here
US consumer spending slows in August; incomes rise
[WASHINGTON] US consumer spending barely rose in August, suggesting that the economy's main growth engine was slowing after accelerating sharply in the second quarter.
The Commerce Department said on Friday consumer spending, which accounts for more than two-thirds of US economic activity, edged up 0.1 per cent last month as an increase in outlays on recreational goods and motor vehicles was offset by a decrease in spending at restaurants and hotels.
Data for July was revised slightly down to show consumer spending increasing 0.5 per cent instead of the previously reported 0.6 per cent advance. Economists polled by Reuters had forecast consumer spending gaining 0.3 per cent last month.
Consumer spending, fueled by the lowest unemployment rate in almost half a century, has been blunting some of the hit on the economy from the White House's nearly 15-month trade war in China, which has sunk business investment and manufacturing.
But with tariffs on Chinese goods broadened to include consumer goods, there are fears that spending could slow. There are also worries that weak business investment and sluggish profit growth could constrain companies' ability to continue hiring more workers, and undermine consumer spending.
The Federal Reserve last week cut interest rates for the second time this year, citing the ongoing risks to the longest economic expansion on record from the US-China trade war and slowing global growth.
The US central bank cut rates in July for the first time since 2008. The economy is now in its 11th year of expansion.
Consumer prices as measured by the personal consumption expenditures (PCE) price index were unchanged in August as food prices declined for a third straight month and the cost of energy goods and services dropped 2.0 per cent.
The PCE price index rose 0.2 per cent in July. In the 12 months through August, the PCE price index increased 1.4 per cent, rising by the same margin for a fourth straight month.
Excluding the volatile food and energy components, the PCE price index edged up 0.1 per cent last month after rising 0.2 per cent in July. That lifted the annual increase in the so-called core PCE price index to 1.8 per cent in August, the biggest gain since January, from 1.7 per cent in July.
The core PCE index is the Fed's preferred inflation measure and has undershot the US central bank's 2 per cent target this year.
When adjusted for inflation, consumer spending gained 0.1 per cent in August. This so-called real consumer spending increased 0.3 per cent in July. Consumer spending surged at a 4.6 per cent annualised rate in the second quarter, the fastest pace in 4-1/2 years.
Last month, spending on goods rose 0.1 per cent, driven by outlays on recreational goods and motor vehicles. Spending on services increased 0.2%.
The economy grew at a 2.0 per cent annualised rate last quarter, slowing from the January-March quarter's brisk 3.1 per cent pace. The Atlanta Fed is forecast gross domestic product rising at a 1.9 per cent rate in the third quarter.
Personal income rose 0.4 per cent in August after nudging up 0.1 per cent in the prior month. Wages increased 0.6 per cent. With income growth outpacing spending, savings rose to US$1.35 trillion from US$1.29 trillion in July.