Consumer spending in the U.S. stagnated in June as labor-market weakness prompted Americans to use the biggest gain in incomes in three months to build savings.
Bloomberg reported that household purchases, which make up 70% of the economy, were unchanged last month after a 0.1% decline in May, a Commerce Department report showed today in Washington.
The median estimate in a Bloomberg News survey of economists called for a 0.1% rise. Incomes climbed 0.5%, lifting the saving rate to 4.4%, the highest in a year.
Americans may be growing less pessimistic about job prospects later in the year, with another report today (July 31)showing consumer confidence rose unexpectedly for the first time in five months. Federal Reserve policy makers meeting today and tomorrow may wait for more employment data before deciding whether action is needed to boost an economy that’s slowed for two straight quarters.
“There’s been some back-tracking in the labor market so consumers are choosing to save the income rather than spend it,” said Julia Coronado, chief economist for North America at BNP Paribas in New York, who correctly projected the stagnation in purchases. “The third quarter will be pretty subdued.”