WASHINGTON- US consumer spending surged in August, but outlays adjusted for inflation were weaker than initially thought in the prior month, reinforcing expectations that economic growth slowed in the third quarter as COVID-19 infections flared up.
The report from the Commerce Department on Friday, which showed inflation remaining hot in August, raised the risk of consumer spending stalling in the third quarter, even if spending accelerates further in September. Inflation-adjusted, or the so-called real consumer spending is what goes into the calculation of gross domestic product.
“Third quarter consumer spending is on track for only a scant gain,” said Tim Quinlan, a senior economist at Wells Fargo in Charlotte, North Carolina. “If COVID cases keep falling and sentiment turns positive, there is scope for a more solid finish to this tumultuous year.”
Consumer spending, which accounts for more than two-thirds of US economic activity, rebounded 0.8 percent in August. Data for July was revised down to show spending dipping 0.1 percent instead of gaining 0.3 percent as previously reported.
Consumption was boosted by a 1.2 percent rise in purchases of goods, reflecting increases in spending on food and household supplies as well as recreational items, which offset a drop in motor vehicle outlays. A global shortage of semiconductors is undercutting the production of automobiles.
Goods spending fell 2.1 percent in July. Spending on services rose 0.6 percent in August, supported by housing, utilities and health care. Services, which account for the bulk of consumer spending, increased 1.1 percent in July. Spending is shifting back to services from goods, but the resurgence in coronavirus cases, driven by the Delta variant, crimped demand for air travel, hotel accommodation and sales at restaurants and bars. – Reuters
