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Consumer spending rises strongly; inflation firming

August 30
10:28 2018

U.S. consumer spending increased solidly in July, pointing to strong economic growth early in the third quarter, while a measure of underlying inflation hit the Federal Reserve’s 2 percent target for the third time this year.

Other data on Thursday showed an increase in new applications for unemployment benefits last week, but the underlying trend continued to point to a robust labor market. Strong domestic demand, rising inflation and a tightening jobs market likely will keep the U.S. central bank on course to increase interest rates for a third time this year in September.

The Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.4 percent last month after advancing by the same margin in June. Households spent more at restaurants and on accommodation last month.

There was also an increase in spending on prescription medication. Economists polled by Reuters had forecast consumer spending rising 0.4 percent in July.

With demand strong last month, prices continued their gradual upward trend. The personal consumption expenditures (PCE) price index excluding the volatile food and energy components rose 0.2 percent after edging up 0.1 percent in June.

That lifted the year-on-year increase in the so-called core PCE price index to 2.0 percent from 1.9 percent in June. The core PCE index is the Fed’s preferred inflation measure. It hit the U.S. central bank’s 2 percent inflation target in March for the first time since April 2012.

Continue Reading at Reuters

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