Biggest gain in 5 months for consumer spending

Rick Moran
Finally, a piece of unambiguous good news. Consumer spending rose 0.8% - the biggest jump in 5 months.

Wall Street Journal:

Income rose 0.3% as wages and salaries grew. The saving rate slowed to 5.0%, an indication people were feeling a little more confident in the economy. The saving rate in June was 5.5%.

Consumer spending is very important to overall growth, so the report Monday provided some hope for an economy that has slowed sharply this year. Last week, the government lowered its estimate for growth in the second quarter, saying the economy increased only 1.0% April through June.

Unemployment is high in the U.S., discouraging spenders. And elevated gasoline prices have robbed consumers of some purchasing power.

In a speech Friday, Federal Reserve Chairman Ben Bernanke said the central bank stands ready to provide further support for a recovery that is more than two years old and saddled with a 9.1% jobless rate. Mr. Bernanke added he expects the economy to pick up speed in the second half of the year. Monday's report supports that belief. The 0.8% gain in July spending followed an upwardly revised drop of 0.1% in June; Commerce originally reported a 0.2% drop. Income in June was also revised up, rising 0.2% instead of 0.1% as originally estimated.

For July, economists surveyed by Dow Jones Newswires were expecting spending to rise 0.5% and income to climb 0.4%.

It's still not clear if a rise in consumer spending over several months will start the jobs engine going. Other factors appear to be putting a stopper in job creation, including a lack of faith in government to get its fiscal house in order as well as costs associated with new regulations and Obamacare.

But at least consumers appear ready for an improvement in the economy even if businesses are still wary.


Finally, a piece of unambiguous good news. Consumer spending rose 0.8% - the biggest jump in 5 months.

Wall Street Journal:

Income rose 0.3% as wages and salaries grew. The saving rate slowed to 5.0%, an indication people were feeling a little more confident in the economy. The saving rate in June was 5.5%.

Consumer spending is very important to overall growth, so the report Monday provided some hope for an economy that has slowed sharply this year. Last week, the government lowered its estimate for growth in the second quarter, saying the economy increased only 1.0% April through June.

Unemployment is high in the U.S., discouraging spenders. And elevated gasoline prices have robbed consumers of some purchasing power.

In a speech Friday, Federal Reserve Chairman Ben Bernanke said the central bank stands ready to provide further support for a recovery that is more than two years old and saddled with a 9.1% jobless rate. Mr. Bernanke added he expects the economy to pick up speed in the second half of the year. Monday's report supports that belief. The 0.8% gain in July spending followed an upwardly revised drop of 0.1% in June; Commerce originally reported a 0.2% drop. Income in June was also revised up, rising 0.2% instead of 0.1% as originally estimated.

For July, economists surveyed by Dow Jones Newswires were expecting spending to rise 0.5% and income to climb 0.4%.

It's still not clear if a rise in consumer spending over several months will start the jobs engine going. Other factors appear to be putting a stopper in job creation, including a lack of faith in government to get its fiscal house in order as well as costs associated with new regulations and Obamacare.

But at least consumers appear ready for an improvement in the economy even if businesses are still wary.