July Sees Increased Spending Across The Board
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Personal Income/Spending July June !Surprise: No !
Income: 0.3% 0.4% !Trend: !
Spending: 0.6% 0.4%r ! Possible !
PCE Deflator: 0.2% 0.3% ! Consumer !
! Rebound !
! !
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By Jonathan Nicholson
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)-Consumer spending accelerated in July, as shoppers dug into their savings to buy big-ticket items.
The Commerce Department said spending advanced 0.6% in July, an acceleration from the revised 0.4% gain seen in June. The June gain had previously been reported as a 0.5% increase.
On the other side of the personal finance ledger, income grew by 0.3% in July, down from June.
With growth in spending rising faster than income growth, consumers apparently made up the difference by digging into their savings or by borrowing.
The personal saving rate - the percentage of income remaining after spending - was a negative 0.2%. That's the first time since February the saving rate has edged into negative territory.
A negative saving rate means consumers borrowed to keep spending or liquidated previously-held assets. The saving rate had been 0.1% in June.
The news may weigh slightly on financial markets, which had expected a slightly smaller advance in spending. Investors, as well as Federal Reserve policy makers, have welcomed signs that growth is easing in the third quarter after running at an average annual pace of more than 5% in the first two quarters of 2000.
In leaving short-term interest rates alone at their most recent policy meeting on Tuesday, the Fed said recent economic data have shown "aggregate demand is moderating toward a pace closer to the rate of growth of the economy's potential to produce."
The pause was the second in a row after the Fed had raised rates a total of six times since the summer of 1999. However, the Fed left open the possibility of further hikes, noting it remained concerned about strong demand in the face of tight labor markets.
But July's spending report showed consumers resumed their spending at a healthy pace. Spending on durable goods, those meant to last three or more years, increased 0.8%, after four months of decline.
Spending on non-durables was up 0.5%, a slight deceleration from June's 0.7% pace.
Purchases in the services sector increased 0.6%, the largest monthly gain since March.
While spending moved ahead, however, the Fed may take comfort in a tame reading on inflation contained in the report. The chain-weighted price index for spending was up only 0.2%, following June's 0.3% increase. This year, the spending deflator has supplanted the more widely-watched Consumer Price Index as the Fed's favored gauge of price pressures.
-Jonathan Nicholson, Dow Jones Newswires; 202-862-9255
(MORE) DOW JONES NEWS 08-28-00
08:30 AM
=DJ Table Of Personal Income Data From Commerce
July June May
(annual rate in trillions of dollars,
% changes are increases unless preceded
by minus sign.)
Personal Income 8.285 8.264 8.230
% Change 0.3 0.4 0.3
Wage and Salary 4.779 4.755 4.725
Manufacturing 0.818 0.814 0.808
Farm 0.016 0.025 0.018
Rental Income 0.138 0.140 0.141
Dividends 0.397 0.395 0.392
Personal Interest
Income 1.032 1.030 1.028
Transfer Payments 1.069 1.067 1.077
Old-Age Survivors 0.624 0.625 0.634
Disability and Health
Insurance Benefits
Personal Consumption 6.771 6.733 6.703
Expenditures
% Change 0.6 0.4 0.3
Durable Goods 0.818 0.812 0.812
Non-Durable Goods 2.017 2.008 1.995
Services 3.936 3.913 3.896
Savings Rate -0.2 0.1 0.3
(END) DOW JONES NEWS 08-28-00
08:30 AM |
