Consumer Spending Increases In June Driven By Restaurants, Accommodations

Driven by spending at restaurants and on accommodations, U.S. consumer spending increased in June, setting the stage for a strong economy heading into the third quarter.

According to a report in Reuters citing the Commerce Department, consumer spending rose 0.4 percent in June. Meanwhile, data was revised upward for May, showing that spending increased 0.5 percent instead of 0.2 percent. Inflation remained low during June. Consumer spending represents more than two-thirds of U.S. economic activity, noted Reuters.

“More spending on ‘wants,’ not ‘needs,’ is always a good sign of consumer confidence,” said Jennifer Lee, a senior economist at BMO Capital Markets. “As long as incomes continue to rise and job creation remains strong, consumer spending should remain solid over the remainder of the year.”

The increase in consumer spending in June matched economists’ expectations for the month. For the second quarter, the economy grew at a 4.1 percent rate, which is nearly double the growth of 2.2 percent for the January through March period. It is the strongest pace of growth in close to four years, noted Reuters.

Spending on the part of consumers was driven by restaurants and accommodations, while spending on services increased 0.6 percent after rising 0.3 percent in May. Spending on goods remained unchanged after increasing 0.9 percent in May. Also helping spending in June was a 0.4 percent increase in personal income, which was in line with May’s increase. Savings hit $1.050 trillion in June, up from $1.047 trillion in May.

Consumer spending wasn’t the only thing that was up in June. The Commerce Department said on July 16 that retail sales increased by 0.5 percent in June from May, The Wall Street Journal reported. During the month, consumer spending at personal care and health stores jumped in June by the highest monthly rate in over 14 years. In addition, gas prices and vehicle sales bolstered the increase. At the same time, however, sales at department stores dropped by 1.8 percent, as consumers continue to move their spending to eCommerce.

Overall, consumer spending has increased over the second quarter following slow spending in the winter. During that quarter, retail sales increased 1.9 percent from the first three months of the year. Retail spending was also up 5.9 percent from the second quarter of last year.