Consumer spending in the U.S. stagnated in June as Americans used the biggest gain in incomes in three months to boost savings, indicating a weak handoff to the second half of the year.
Household purchases, which account for about 70 percent of the economy, were unchanged after a 0.1 percent decrease the prior month that was previously reported as little changed, a Commerce Department report showed today in Washington. The median estimate in a Bloomberg News survey of economists called for a 0.1 percent rise. Incomes rose 0.5 percent, lifting the savings rate to 4.4 percent, the highest in a year.
The results may raise concern limited job prospects are causing Americans to pull back at the same time business investment is cooling and the European debt crisis has triggered a slowdown in overseas markets. Federal Reserve policy makers meet today and tomorrow to determine whether more monetary stimulus is needed to shore up an economy that’s slowed for two straight quarters.
“Consumers are likely to be cautious,” Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York, said before the report. “The labor market is poor. There is a significant deceleration in the economy.”
Stock-index futures maintained gains after the figures and before the start of the Fed’s policy meeting. The contract on the Standard & Poor’s 500 Index expiring in September rose 0.1 percent to 1,381.8 at 8:40 a.m. in New York.
Projections of the 76 economists surveyed by Bloomberg for spending ranged from a drop of 0.1 percent to a gain of 0.4 percent. The May reading was previously reported as unchanged.
Adjusting consumer spending for inflation, which renders the figures used to calculate gross domestic product, purchases dropped 0.1 percent, the most since August, after a 0.1 percent increase in the previous month, today’s report showed.
Spending on durable goods, including automobiles, was unchanged after a 0.4 percent drop. Purchases of non-durable goods, which include gasoline, fell 0.4 percent. Spending on services was unchanged.
The Bloomberg survey median called for incomes to rise 0.4 percent in June. The 0.3 percent gain in May was revised up from 0.2 percent.
The saving rate increased from 4 percent. Wages and salaries climbed 0.5 percent after a 0.1 percent gain.
Disposable income, or the money left over after taxes, increased 0.3 after adjusting for inflation. It rose 0.5 percent in the prior month.
The June results indicate the consumer was losing steam as the quarter drew to a close. Household spending rose 1.5 percent from April through June, the slowest pace in a year, Commerce Department data showed last week. Gross domestic product climbed at a 1.5 percent annual rate, cooling from a 2 percent pace in the prior three months.
Retailers’ results foreshadowed the weakness. Sales fell in June for a third straight month, the longest period of declines since 2008. Same-store purchases rose less than analysts’ estimates at chains like Target Corp. (TGT:US) and Macy’s Inc. (M:US)
Americans’ moods remain dim. The Bloomberg Consumer Comfort Index fell in the week ended July 22 to the lowest level in two months. The Thomson Reuters/University of Michigan final gauge of sentiment dropped in July to the lowest level of 2012.
Later this week, the Labor Department may report payrolls advanced in July by 100,000 after rising 80,000 in June, according to the Bloomberg survey median. Unemployment probably held at 8.2 percent for a third month. The rate has exceeded 8 percent for more than three years.
Progress in reducing the jobless rate probably will be “frustratingly slow,” Bernanke told lawmakers in testimony this month. He also said the central bank is “prepared to take further action as appropriate to promote a stronger economic recovery.”
Some companies are holding up better. Cheesecake Factory Inc. (CAKE:US), which runs casual dining restaurants, projected annual per- share earnings that exceeded analysts’ forecasts and said second- quarter revenue got a boost from more customer visits.
Guest counts “are still growing for our concept,” Chief Financial Officer Douglas Benn said on a July 25 conference call with analysts. “I don’t see that much difference in the macro environment that’s causing me concern. I think it has been and continues to be and probably will continue to be for a while a very sluggish and slow recovery.”
An index of inflation tied to spending patterns increased 1.5 percent from June 2011. The so-called core price measure, which excludes food and fuel, rose 0.2 percent from the prior month and 1.8 percent from the same month last year.
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