| |
| |
![]() |
| |
|
| |
|
| |
|
WASHINGTON : US consumers snapped shut wallets as a boost from tax rebates wore off and inflation soared in July, government data showed Friday in what could be a bad omen for an economy dependent on consumer spending.
Spending rose 0.2 percent in July from June, the weakest gain since February as consumers shied away from durable goods purchases of cars and other big-ticket items, the Commerce Department reported.
Personal incomes slid 0.7 percent, the steepest drop since August 2005.
Disposable incomes, after taxes, fell 1.1 percent in July following a 1.9 percent decline in June.
Spending in July was in line with most analysts' forecasts but the decline in incomes was sharply steeper than the 0.2 percent expected.
The Commerce Department left unrevised June data showing spending up 0.6 percent and incomes up a scant 0.1 percent.
Soaring food and energy prices pushed inflation to 4.5 percent, the strongest annual pace in 17 years, further pressuring US consumers as the economy is hammered by a housing market crisis, tight credit and rising unemployment.
Analysts noted that a massive government tax-rebate program launched in late April to stimulate spending and economic growth was winding down.
"In spite of the rapid dispersal of the economic stimulus payments in the April to July period, consumers pulled back on real spending in both June and July in the face of weak employment conditions, higher energy prices, and further declines in household net worth," said Brian Bethune, economist at Global Insight.
The Treasury Department announced Friday it has distributed tax rebates totaling 93.39 billion dollars and was continuing to send out "small batches" of payments after the end of mass mailings on July 11.
Ian Shepherdson, economist at High Frequency Economics, said the July spending and income report showed a "very soft" start to the third quarter.
"With the tax-refund effect on spending now more or less over, we think the worst is yet to come for consumers, and we expect an outright decline in real Q3 (third-quarter) consumption," Shepherdson said.
Most analysts expect economic growth to slow in the second half of the year, after accelerating to a 3.3 pace in the second quarter from 0.9 percent in the first quarter.
On the inflation front, the personal consumer expenditure (PCE) price index rose 0.6 percent in July from June, cooling slightly from a 0.7-percent rise in June.
Core PCE, excluding food and energy prices, climbed 0.3 percent, mirroring June's gain.
On a 12-month basis, inflation picked up momentum. The July headline PCE was 4.5 percent, compared with 4.0 percent in June, and was the highest price rise since February 1991.
The rise in core PCE was more moderate, up 2.4 percent in July from 2.3 percent June. Still, the July core reading was the highest since February 2007.
The PCE index is closely watched by the Federal Reserve for a reading on inflation in the world's largest economy, where consumer spending fuels two-thirds of activity.
In data adjusted for inflation, personal income dropped 1.7 percent in July, following a 2.6 percent decline in June, and consumer spending slipped 0.4 percent, the strongest decline since June 2004, after a 0.1 percent decline in June.
Personal saving fell to 1.2 percent of disposable income from 2.5 percent in June.
Several Fed policy makers have expressed concern in recent months about building inflationary pressures but the central bank instead has focused on sluggish growth. The central bank is expected to hold its base interest rate at a low 2.0 percent until 2009. - AFP/ms/ls
|
