U.S. consumer spending slowed in July amid delta variant concerns

Consumer spending in the United States slowed in July as the fast-growing contagious delta variant weakened confidence about economic development but consumers continue to demonstrate a strong demand for a wide range of goods and services.

Consumer spending, which accounts for more than two-thirds of all economic activity in the country, increased by 0.3 percent last a month after advancing by 1.1 percent in June, according to the Commerce Department on Friday.

Demand is shifting back to services like travel and leisure, but spending hasn't been enough to compensate for the decline in goods purchases, which are also being hurt by shortages, particularly of motor vehicles.

Last month, consumer spending on goods decreased 1.1 percent, driven by automobiles. Automobile manufacture is being hampered by a global scarcity of semiconductors. Spending on leisure items, as well as clothes and footwear, decreased.

The government announced on Thursday that consumer spending increased at a healthy 11.9 percent annualized rate in the second quarter, accounting for a sizable portion of the economy's 6.6 percent growth rate, lifting GDP over its peak in the fourth quarter of 2019.

Inflation remained hot in July, fueled by persistent supply restrictions and the economy's return to normality following the pandemic's disruption.

Spending on services increased by 1.0 percent. Spending at restaurants and hotels drove the overall increase.

The personal consumption expenditures (PCE) price index rose 0.3 percent in July after rising 0.5 percent in June, 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.

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.

With inputs from Reuters

Picture Credits: The Loadstar