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US July consumer spending rises 0.1%

US consumer spending barely rose and inflation was tame in July, offering a cautionary note on the economy as the Federal Reserve weighs cutting back its massive bond buying program.

The Commerce Department said yesterday that consumer spending ticked up 0.1 percent as outlays on services were flat and purchases of durable goods such as automobiles fell.

June’s increase in consumer spending was revised up to 0.6 percent from a previously reported 0.5 percent.

Economists polled by Reuters had expected consumer spending, which accounts for about 70 percent of US economic activity, to gain 0.3 percent last month.

The tepid demand dampened inflation pressures last month. A price index for consumer spending edged up 0.1 percent, slowing from a 0.4 percent hike in June. Over the past 12 months, prices rose 1.4 percent compared with 1.3 percent in June.

It was the biggest increase since February.

Excluding food and energy, the price index for consumer spending nudged up 0.1 percent after advancing 0.2 percent in June. Core prices were up 1.2 percent from a year ago, rising by the same margin for a fourth consecutive month.

Both inflation measures continue to trend below the Fed’s 2 percent target. That, combined with the lackluster consumer spending, would argue against the US central bank trimming the US$85 billion in bond purchases it is making each month to keep interest rates low.


 

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