US consumer spending falls unexpectedly

Consumer spending in the US fell unexpectedly in July for the first time in six months, and experts believe this could hamper economic growth in the world's first economy.

Household purchases decreased 0.1 per cent after increasing 0.4 per cent in June, according to Commerce Department figures published today (August 29th).

The Wall Street Journal reported that the personal consumption expenditures price index rose 1.6 per cent in July from a year earlier. That matched the prior month's annual gain, and is below the Federal Reserve's two per cent long-run target.

Meanwhile, incomes climbed 0.2 per cent, the smallest monthly advance this year. Consumer spending, which accounts for about 70 per cent of the economy, has been held back by tight credit and low wage growth that is barely able to keep up with inflation.

“It’s a weak starting point for the third quarter," Jacob Oubina, senior US economist at RBC Capital Markets LLC in New York told Bloomberg. “It’s going to lead to a markdown in third-quarter forecasts," he added.

Stock-index futures lost some of its past gains after the report, with the Standard & Poor’s 500 Index rising 0.1 per cent to 1,999.3 at 08:44 ET in New York.

These new figures contrast with yesterday's release of data from the Bureau of Economic Analysis (BEA), which showed the US economy grew at an annual rate of 4.2 per cent in the second quarter of 2014.

The revision is up from BEA’s four per cent advance estimate released last month, reflecting growing personal consumption, private inventory investment, exports, both residential and nonresidential fixed investment, as well as local government spending.

Find up to date information on the FTSE 100 and spread betting strategies at City Index.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.