US consumer spending rises modestly, inflation tame

U.S. consumers increased spending moderately in July as households bought more automobiles, while income growth was propelled by the biggest jump in salaries and wages in eight months, the government reported Friday, offering further evidence of strength in the economy.

The Commerce Department said consumer spending—which accounts for 70 percent of U.S. economic activity—rose 0.3 percent last month, following a similar 0.3 percent advance in June.

Spending on durable goods—expensive manufactured items expected to last at least three years—rose 1.1 percent in July, reversing the previous month’s 1.1 percent drop. Automobile purchases accounted for about half the increase. Spending on services like utilities rose 0.2 percent.

Personal income increased 0.4 percent last month, rising by the same amount for a fourth consecutive month. Wages and salaries jumped 0.5 percent, the biggest rise since late 2014, after gaining 0.2 percent in June.

With income gains outpacing spending, the personal saving rate increased to 4.9 percent from 4.7 percent in June.

Despite the steady increase in consumption, inflation remained tame. Inflation, which persistently has run below the 2-percent Federal Reserve (Fed) target, rose 0.1 percent in July, slowing from a 0.2 percent increase the previous month. In the 12 months through July, the personal consumption expenditures (PCE) price index rose only 0.3 percent.

Excluding energy and food, prices rose 0.1 percent for the fourth consecutive month. The so-called core PCE index rose 1.2 percent in the 12 months through July, the smallest increase since early 2011.

The consumer-spending report was the latest indicating momentum in the economy as it confronted recent global financial-market turbulence, sparked by concerns over a slowing Chinese economy. The report also suggested the economy maintained some of its strength from the second quarter, when it expanded at a 3.7 percent annual rate.