U.S. consumer spending increased in June, bolstered by services

Consumer spending in the United States increased in June, like vaccines against COVID-19 increased demand for travel-related services.

Consumer spending, which accounts for more than two-thirds of all economic activity in the United States, increased by 1 percent last a month after falling by 0.1 percent in May, according to the Commerce Department on Friday.

Even though personal income hardly increased last month, other statistics released on Friday indicated pay growth in the second quarter was the highest in 13 years on an annual basis. Growing family wealth and adequate savings could keep consumer spending high while rising COVID-19 infections represent a concern.

Nearly half of the population has been immunized against COVID-19, allowing Americans to travel, visit restaurants, gamble, and attend athletic events, among other activities that were restricted early in the epidemic.

Last month, service spending increased by 1.2 percent. Spending at restaurants and hotels drove the overall increase.

Goods spending increased by 0.5 percent. Spending on durable goods fell 1.5 percent, owing to a drop in automobile sales. Nondurable goods spending increased by 1.8 percent.

The statistics were included in the second-quarter GDP report, which was released on Thursday. Consumer spending increased at a healthy 11.8 percent annualized rate last quarter, contributing to a sizable portion of the economy's 6.5 percent growth rate, lifting GDP over its peak in the fourth quarter of 2019.

Inflation is growing as demand exceeds supply.

The personal consumption expenditures (PCE) price index climbed 0.4 percent in June after rising 0.5 percent in May, excluding volatile food and energy components. Increases in the prices of airline tickets used vehicles, and hotel and motel accommodations boosted the so-called core PCE price index.

The Federal Reserve of the U. S. held its overnight benchmark interest rate near zero on Wednesday and maintained its bond-buying program.

Although the fiscal boost is waning and COVID-19 cases are increasing in areas with lower vaccination rates, owing to the Delta variant of the coronavirus, consumer spending is expected to rise further.

During the pandemic, households amassed at least $2 trillion in surplus savings. Household wealth is being boosted by record-high stock market values and rising property prices. Wages are growing as businesses fight for limited labor.

Source: Reuters