Consumer spending beat the July forecasts by rising 0.8% as Americans raided their savings accounts to buy cars, school goods for their children, and struggled to pay higher utility bills due to the recent heat wave across the country. Industry data showed automobiles sold at its fastest pace in at least three months. However, spending for services such as electricity and gas climbed at its fastest pace since December 2009. It is predicted that spending will cool for the month of August as consumer confidence indicators show a rapid decline.
The Commerce Department released the figures today which indicated the largest part of the U.S. economy (the consumer) is holding up fairly well.
Estimates by 74 economists surveyed by Bloomberg News called for a .05% increase, so the .08% increase was seen as a welcome sign that the U. S. consumer is alive and kicking. It was reported also that income grew at a rate of .03% while the savings rate among Americans is at a four month low.
It is predicted that spending will cool for the month of August as consumer confidence indicators show a rapid decline. A slump in confidence threatens to cut the gains in spending and salaries short.
“Recent headlines regarding slowing growth and the U.S. credit rating downgrade underscore the continued weakness in the U.S. economy,” Robert A. Niblock, chairman and chief executive officer, said on an Aug. 15 conference call. “The volume of negative news and the unsettling impact on equity markets is having a significant effect on an already fragile consumer mindset.”
The unemployment rate was 9.1% in July while only 117,000 jobs were added to the payrolls. “It is clear that the recovery from the crisis has been much less robust than we had hoped,” Federal Reserve Chairman Ben S. Bernanke said last week at the Federal Reserve’s annual Jackson Hole, Wyoming, conference. “Economic growth has, for the most part, been at rates insufficient to achieve sustained reductions in unemployment.”