US consumer spending increased for the second consecutive month in June, setting consumption for a rebound in the third quarter, although the recovery could be limited by a resurgence in the Covid-19 cases and the end of expanded unemployment benefits.
The Commerce Department said on Friday that consumer spending, which accounts for more than two-thirds of US economic activity, increased 5.6% last month after a record jump of 8.5% in May as that more companies reopened their doors. Consumers intensified purchases of clothing and footwear. They also spent more on medical care, restaurants, and hotel and motel accommodation.
Economists polled by Reuters had predicted that consumer spending would advance 5.5% in June. When adjusted for inflation, consumer spending increased 5.2% last month after an 8.4% increase in May.
The data was included in Thursday’s advance report of gross domestic product for the second quarter, which showed the economy contracted at a record annualized rate of 32.9% as consumer spending plummeted to a record 34.6%. .
With June’s rise, inflation-adjusted consumer spending withdrew from April’s deep hole, although it remains below its pre-pandemic level. This places spending on a path of higher growth towards the July-September quarter.
But the explosion of Covid-19 infections, especially in the densely populated southern and western regions, where authorities in the hardest hit areas are closing businesses again and pausing to reopen, is casting doubt on the magnitude of the expected increase in consumer spending in the third quarter.
In addition, tens of millions of unemployed Americans will lose $ 600 in additional weekly unemployment benefits on Friday after the White House and Congress failed to reach an agreement to extend the supplement, allowing them to pay rent and buy food. , among other expenses.
Stock index futures would open higher after tech titans Apple, Amazon.com and Facebook posted explosive quarterly earnings, which helped keep nerves upset by the spread of the new coronavirus at bay. The dollar remained practically flat against a basket of coins. US Treasury bond prices fell.
In June, consumer spending was driven by a 6.4% increase in purchases of goods. Disbursements in services increased 5.2%.
Personal income fell 1.1% last month after declining 4.4% in May as government welfare payments decreased. Wages rose 2.2% after recovering 2.6% in May. The savings rate fell to a still high 19% from 24.2% in May.
Monthly inflation increased in June, driven by the prices of food and energy goods and services, although the trend remained subdued. The Personal Consumption Expense Price Index (PCE) excluding volatile food and energy components increased 0.2%, matching the gain for May.
In the 12 months to June, the so-called PCE basic price index increased 0.9% after increasing 1.0% in May. The basic PCE index is the preferred measure of inflation for the Federal Reserve’s 2% target.
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