Consumer Spending Surges in August Despite Waning Confidence
U.S. consumer spending rose 0.9% in August, defying weak confidence data and rising inflation.
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Americans increased their spending in August, defying some of the weakest readings on consumer sentiment and confidence in years, according to the Commerce Department’s Bureau of Economic Analysis. Personal consumption expenditures rose 0.9 percent, or $190.8 billion, following a revised 0.1 percent increase in July. Adjusted for inflation, spending increased 0.6 percent, following a 0.1 percent gain the prior month.
Confidence Wanes, Spending Rises
The burst in spending has not been matched by how households say they feel. The Conference Board’s consumer-confidence index fell to 81.9 in September, the lowest level since 2014. The University of Michigan’s sentiment index finished September at 48.1, down from 51.7 in August and 15 percent below its January reading. Consumers have pointed to high prices, gasoline costs, and a weaker outlook for jobs and business. Those worries have not shown up at the cash register.
Goods and Services Drive Spending
Spending on goods increased $114.1 billion, while spending on services rose $76.7 billion. The largest contributions came from other nondurable goods, gasoline and other energy products, food services and accommodations, and motor vehicles and parts. Recreational goods also rose, though recreation services were the exception, falling $10.3 billion.
Inflation and Income Trends
Incomes rose at a level consistent with the Federal Reserve’s two percent inflation goal. Personal income increased 0.2 percent, or $66.6 billion, less than economists had expected, as private wages and government social benefits rose. Disposable personal income—income after taxes—increased 0.3 percent. After inflation, real disposable income was unchanged.
Still Stubborn Inflation
Prices moved higher, highlighting still stubborn inflation and the toll of the rise in gasoline prices triggered by the Iran war. The personal-consumption expenditures price index, the Federal Reserve’s preferred inflation gauge, rose 0.3 percent in August after a 0.1 percent increase in July. Excluding food and energy, prices rose 0.2 percent. From a year earlier, the PCE index was up 3.4 percent, matching the July yearly gain, and the core index was up 3.0 percent—still above the Fed’s target, though both annual readings came in below forecasts.
Revisions and Economic Impact
Wednesday’s report incorporated the annual update of the national accounts, with revisions to personal income and outlays beginning in January 2021. Those revisions also lowered previously published inflation readings. Consumer spending accounts for about two-thirds of U.S. economic output. The August rebound, after a soft July, left demand firm even as higher prices and borrowing costs continued to weigh on household surveys.
Source: Breitbart
