U.S. Personal Income Rises Slightly More Than Expected In June

The Commerce Department releases its June report on consumer spending, which accounts for 70 percent of economic activity, on Monday, August 3, 2015.

The modest advance followed a revised 0.7 per cent rise in spending in May.

Consumer spending in June rose by the smallest amount in four months as shoppers cut back on purchases of cars and other big-ticket items. Americans bought fewer vehicles in June after snapping up new autos in May at the highest pace since the recession ended more than six years ago.

Personal income rose 0.4% (0.3% estimated) and personal spending rose 0.2%. In June, spending on long-lasting goods such as automobiles fell 1.3 per cent, reversing the prior month’s increase. The PCE price index, the favorite inflation gauge of the Federal Reserve, increased 0.2% in June.

Economists surveyed by The Wall Street Journal had expected a 0.2% increase in consumer spending and a 0.4% increase in personal income. Prices excluding food and energy are up just 1.3 per cent.

WASHINGTON U.S. consumer spending in June advanced at its slowest pace in fourth months as demand for automobiles softened, suggesting the economy lost some momentum at the end of the second quarter. That was up from a revised 0.6 percent GDP increase in the first quarter.

The core rate has been frozen at a 1.3% annual rate through the first six months of 2015, though there are signs it’s about to rise, especially now that gasoline prices have leveled off after a big drop during the second half of previous year.

While the tepid consumer spending suggests less vigor in the economy heading into the third quarter, any slowdown is likely to be mitigated by a strengthening housing sector and tightening labor market, which are boosting household wealth. But Fed officials kept a key borrowing rate at a record low near zero, where it has been for nearly seven years.

The Fed’s assessment left the door open for a possible interest rate hike in September, which would be the first increase in almost a decade. Inflation has now run below the Fed’s 2% target for more than three years.