Consumer Finance

Consumer Spending For July Slightly Under Expectations

The Commerce Department said consumer spending in the U.S. saw a uptick that was slightly under what was expected in July, while the annual rate of inflation moved at the slowest rate in more than a year and a half.

That’s according to news from Reuters, which cited data from the Federal Reserve issued Thursday (Aug. 31). According to the report, the annual inflation is staying low despite the labor force being close to full employment. Data from the Federal Reserve on Thursday also showed there was only a slow uptick in the number of applications for unemployment benefits.

“The consumer continues to do the heavy lifting when it comes to economic growth,” Chris Rupkey, chief economist at MUFG, said in the Reuters report. “Inflation is in the slow lane for now, and this is likely to make Fed officials cautious on the need to raise rates a third time this year.”

According to the report, the Commerce Department said consumer spending jumped 0.3 percent in July after gaining 0.2 percent in June. Economists had expected a 0.4 percent increase for the month of July, reported Reuters. The personal consumption expenditures (PCE) price index increased 0.1 percent in July.

With consumer spending at moderate rates and inflation not rising, there are doubts growing over whether the Federal Reserve will move to raise interest rates at its end of the year policy meeting. Most economists think the Fed will raise rates, reported Reuters.

“We expect core inflation to get worse on a year-over-year basis before it gets better, making it an easy decision for the Fed to skip raising rates at its September meeting and focus on the balance sheet only,” said Ellen Zentner, chief U.S. economist at Morgan Stanley, in the same report. Reuters noted the financial market gives it about a 31 percent probability that the Fed will raise rates, which is down from 35 percent earlier in the year.

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