Consumer spending in the U.S. rose more than forecast in July, exceeding gains in incomes, a sign the improvement will not last without more jobs.
Purchases rose 0.4 percent, the most since March, after little change the prior month, Commerce Department figures showed today in Washington. Incomes climbed 0.2 percent, less than projected, and the savings rate dropped.
Disposable incomes, or the money left over after taxes, dropped for the first time since January after adjusting for inflation, showing the lack of jobs is hurting Americans’ spending power. Companies from Intel Corp. to J. Crew Group Inc. are cutting forecasts as unemployment and flagging confidence prompt households to scale back.
Stock-index futures fell after the report, extending earlier losses, and Treasury securities rose. The contract of the Standard & Poor’s 500 Index was fell 0.3 percent to 1,060.3 at 8:54 a.m. in New York. The yield on the benchmark 10-year Treasury note dropped to 2.60 percent from 2.65 percent late on Aug. 27.
The median estimate of economists surveyed by Bloomberg News called for a 0.3 percent advance in spending after a previously reported unchanged result for June. The 71 projections ranged from unchanged to an increase of 0.5 percent.
Wages and salaries increased 0.3 percent. Inflation-adjusted incomes after taxes fell 0.1 percent last month after a 0.1 percent June increase. The savings rate decreased to 5.9 percent last month from 6.2 percent in June. Today’s report also showed inflation was accelerated. The gauge tied to spending patterns increased 1.5 percent from July 2009, compared with a 1.4 percent gain in the 12 months ended in June.
The Federal Reserve’s preferred price measure, which excludes food and fuel, rose 0.1 percent in July from the prior month and was up 1.4 percent from a year earlier, matching the median forecast of economists surveyed.
Adjusted for inflation, which are the figures used to calculate gross domestic product, consumer spending rose 0.2 percent after a 0.1 percent increase in July. The gain reflected an increase in purchases of automobiles.
Autos sold at an 11.6 million pace last month, up from an 11.2 million rate in June, according to industry figures. The gain extended a see-saw pattern over the past four months that shows demand is stagnating. Fed Chairman Ben S. Bernanke last week said the central bank “will do all that it can” to ensure a continuation of the economic recovery, and outlined steps it might take if the growth slows.
The U.S. economy grew at a 1.6 percent annual rate in the second quarter, according to revised figures from the Commerce Department released Aug. 27. Corporate profits grew at the slowest rate in a year, employee wages were revised lower and consumer spending rose at a 2 percent annual rate, helped by electricity and natural gas demand.
