(MENAFN- Khaleej Times) Consumer spending in the US rose in August for a fourth consecutive month as a pickup in incomes supported the biggest part of the economy.
Household purchases, which account for about 70 per cent of the economy, climbed 0.3 per cent after a revised 0.2 per cent advance in July that was more than previously estimated, the Commerce Department reported on Friday in Washington. The advance in August matched the median forecast of economists in a Bloomberg survey. Incomes rose 0.4 per cent, the most in six months.
Rising home values and stock market gains that are bolstering net worth are cushioning the effects of this year's payroll tax increase and giving households the means to sustain purchases. At the same time, the pace shows little momentum in spending in the third quarter after a second-quarter slowdown. "The consumer is still in a holding pattern, waiting for better employment prospects," said Russell Price, senior economist at Ameriprise Financial in Detroit. Still, "I was encouraged to see the improvement in wages and salaries."
Another report on Friday showed confidence among consumers declined in September to a five-month low. The Thomson Reuters/University of Michigan's final index of sentiment decreased to 77.5 from an August reading of 82.1.
Projections for spending ranged from increases of 0.1 per cent to 0.5 per cent after a previously reported July gain of 0.1 per cent, according to the Bloomberg survey of 82 economists. The August increase in incomes, which matched the median estimate, followed a revised 0.2 per cent rise the prior month.
The figures follow a Commerce Department report on Thursday that showed the economy grew at a 2.5 per cent annualised rate in the second quarter after expanding 1.1 per cent in the first three months of the year. Consumer spending increased at a 1.8 per cent pace after 2.3 per cent gain in the first quarter.
Adjusting consumer spending for inflation, which generates the figures used to calculate gross domestic product, purchases rose 0.2 per cent in August after a 0.1 per cent increase the previous month, today's report showed. The saving rate climbed to 4.6 per cent from 4.5 per cent, while wages and salaries increased 0.4 per cent after falling 0.3 per cent.
Disposable income, the money left over after taxes, rose 0.3 per cent after adjusting for inflation, the most in five months. It increased 0.2 per cent in July.
Spending on durable goods including automobiles increased 0.8 per cent after a 0.4 per cent gain the prior month. Purchases of non-durable goods including gasoline fell 0.2 per cent after a 0.6 per cent advance. The core price measure, which excludes food and fuel, rose 0.2 per cent from July.
Faster job gains would help drive the wage increases needed to boost household purchases. Employers added 169,000 jobs in August, compared with an average 195,000 a month in the first half of the year.
Federal Reserve policy makers said at the conclusion of their September 17-18 meeting that they want to see more evidence of an improvement in employment and the economy as they unexpectedly decided to continue their record monthly stimulus.
"Conditions in the job market today are still far from what all of us would like to see," Chairman Ben S. Bernanke said after a two-day meeting of the Federal Open Market Committee. "The committee has concern that rapid tightening of financial conditions in recent months would have the effect of slowing growth."
Cheaper borrowing costs have helped keep the auto industry at the forefront of the rebound. Ford Motor, General Motors and Toyota Motor Corp. reported US sales gains in August that exceeded analysts' estimates. Sales of cars and light trucks rose at a 16 million annualized pace during the month, the strongest since November 2007, according to data from Ward's Automotive Group.
At the same time, retailers aren't faring as well. Wal-Mart Stores is cutting orders to suppliers this quarter and next to tame rising inventory. Merchandise has been piling up because consumers have been spending less freely than Wal-Mart projected and the company has forfeited sales because it doesn't have enough workers in stores to keep shelves adequately stocked.
"We feel good about our inventory position," Wal-Mart spokesman David Tovar said in a telephone interview. The order pullback is happening "category by category," Tovar said. "In some cases, we're going to be taking less, in some we're going to be taking more."
US chains are bracing for a tough holiday season, with sales are projected to rise 2.4 per cent, the smallest gain since 2009, according to ShopperTrak, a Chicago-based firm.
Wal-Mart cut its annual profit forecast after same-store sales fell 0.3 per cent in the second quarter.
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.