WASHINGTON (Reuters) – U.S. shopper spending elevated solidly in July, suggesting the economic system remained on firmer floor early within the third quarter and arguing towards a half-percentage-point rate of interest lower from the Federal Reserve subsequent month.
Shopper spending, which accounts for greater than two-thirds of U.S. financial exercise, rose 0.5% final month after advancing by an unrevised 0.3% in June, the Commerce Division reported on Friday. Economists polled by Reuters had forecast spending would speed up by 0.5%.
This means that shopper spending maintained many of the momentum from the second quarter, when it helped to spice up gross home product progress to a 3.0% annualized charge. The economic system grew at a 1.4% tempo within the January-March quarter.
There have been considerations over the economic system’s well being following a leap within the unemployment charge to close a three-year excessive of 4.3% in July. The fourth straight month-to-month rise within the jobless charge led monetary markets and a few economists to place a 50-basis-point charge lower on the desk when the U.S. central financial institution embarks on a broadly anticipated coverage easing in September.
The slowdown within the labor market, principally pushed by a step down in hiring reasonably than layoffs, has caught the eye of policymakers. Fed Chair Jerome Powell final week mentioned “the time has come for coverage to regulate.”
Most economists consider the Fed will resist a half-percentage-point charge discount because the economic system continues to hum alongside and inflation stays above the central financial institution’s 2% goal, although worth pressures proceed to subside.
The non-public consumption expenditures (PCE) worth index rose 0.2% final month after an unrevised 0.1% achieve in June, the report additionally confirmed. Economists had forecast PCE inflation would rise 0.2%. Within the 12 months by July, the PCE worth index elevated 2.5%, matching June’s achieve.
Excluding the unstable meals and vitality parts, the PCE worth index rose 0.2% final month, matching the rise in June. Within the 12 months by July, core inflation elevated 2.6% after advancing by the identical charge in June.
The Fed tracks the PCE worth measures for financial coverage, and has maintained its coverage charge within the present 5.25%-5.50% vary for greater than a 12 months, having raised it by 525 foundation factors in 2022 and 2023.
(Reporting by Lucia Mutikani; Modifying by Andrea Ricci and Paul Simao)
