US consumer spending falls unexpectedly

Consumer spending in the US fell unexpectedly in July for the first time in six months, and experts believe this could hamper economic growth in the world's first economy.

Household purchases decreased 0.1 per cent after increasing 0.4 per cent in June, according to Commerce Department figures published today (August 29th).

The Wall Street Journal reported that the personal consumption expenditures price index rose 1.6 per cent in July from a year earlier. That matched the prior month's annual gain, and is below the Federal Reserve's two per cent long-run target.

Meanwhile, incomes climbed 0.2 per cent, the smallest monthly advance this year. Consumer spending, which accounts for about 70 per cent of the economy, has been held back by tight credit and low wage growth that is barely able to keep up with inflation.

“It’s a weak starting point for the third quarter," Jacob Oubina, senior US economist at RBC Capital Markets LLC in New York told Bloomberg. “It’s going to lead to a markdown in third-quarter forecasts," he added.

Stock-index futures lost some of its past gains after the report, with the Standard & Poor’s 500 Index rising 0.1 per cent to 1,999.3 at 08:44 ET in New York.

These new figures contrast with yesterday's release of data from the Bureau of Economic Analysis (BEA), which showed the US economy grew at an annual rate of 4.2 per cent in the second quarter of 2014.

The revision is up from BEA’s four per cent advance estimate released last month, reflecting growing personal consumption, private inventory investment, exports, both residential and nonresidential fixed investment, as well as local government spending. 

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