Consumer spending up 0.3% in June while incomes rise 0.4%

Business

FILE – In this July 10, 2019, file photo shoppers visit the downtown Target Store in Minneapolis. On Tuesday, July 30, the government reports on the pace of consumer spending in June. (AP Photo/Jim Mone, File)

WASHINGTON (AP) — Consumer spending rose a healthy 0.3% in June, slightly below the strong gains of the past three months, while incomes turned in a solid 0.4% gain for the fourth straight month.

The Commerce Department said Tuesday that the spending increase followed strong gains of 1% in March, 0.6% in April and 0.5% in May as the consumer rebounded following a lackluster start to the year.

An inflation gauge favored by the Federal Reserve showed prices rising 1.4% over the past year, well below the Fed’s 2% inflation target. Fed officials are widely expected to reduce their benchmark interest rate for the first time in a decade at this week’s meeting, in part because of the continued short-fall in inflation despite strong economic growth and unemployment at near a 50-year low.

The overall economy slowed to a growth rate of 2.1% in the April-June quarter from 3.1% in the first quarter as the trade deficit, which is a drag on growth, widened and businesses cut back on capital investment. The slowdown would have much more severe if consumers had not rebounded following a sharp slowdown in the first quarter.

Consumer spending grew at an annual rate of 4.3% in the second quarter after a disappointingly weak 1.1% gain in the first quarter. Economists are optimistic that consumer spending, which accounts for 70% of economic activity, will keep showing solid gains in the second half of this year.

The saving rate rose to 8.1% of after-tax incomes in June, reflecting annual revisions by the government which sharply boosted the previous figures.

The slower spending gain reflected a modest 0.4% rise in spending on durable goods such as autos after a sizzling 1.5% gain in May.

Copyright 2019 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.