Numbers: In June, Americans increased spending on a variety of goods and services as more people returned to work and massive infusions of state aid flowed through the economy, but progress has slowed recently following the peak of recent coronavirus cases.
Personal expenses in June The jump jumped 5.6%, the government said on Friday after an amended 8.5% advance in May.
Revenues fell 1.1% – slightly more than expected – due to lower federal assistance to families.
As part of Washington’s unprecedented efforts to keep people in work or provide them with more generous unemployment benefits during the worst health crisis in a century, the government has sent one-time incentive checks to most families. More aid was distributed in June, but not so much.
Read:In the second quarter, the economy experienced 32.9 percent. Fall – this indicates a recovery
Meanwhile, the closely monitored inflation rate was in line with the highest growth in three years, mainly due to higher gasoline prices. The PCE index, the Federal Reserve’s preferred inflation barometer, rose 0.4%.
Annual inflation was relatively low but below 1%.
What happened: As consumers spend more money on new cars and trucks, clothing, petrol and leisure, as the economy fundamentally recovers. Americans also spent more on medical care as they returned to hospitals for non-coronavirus treatment.
Nevertheless, spending is not working for many Americans, while others worry about their financial security.
Read:Unemployment claims are rising in the second week as the U.S. economy slows
The particularly high level of savings fell to 19% from 24% in May. Households save record levels only if the economy or their own situation changes for the worse.
Inflation, in turn, poses a small threat to the economy.
While the price of some staples, such as gas and food, has risen, most companies have had to cut prices for goods and services to sell more when demand collapsed at the start of a pandemic.
Read:July. Consumer confidence has declined and indicates a sharper economic recovery
According to the PCE index, inflation has risen to 0.8% in the last 12 months, from 0.5%. However, it is much lower than in January. 1.9%.
Separate inflation, eliminating food and energy, is called the base rate, in June. Increased 0.2%. However, it has risen only 0.9% in recent years and is almost the lowest level since the Great Recession a decade earlier.
See: MarketWatch economic calendar
Big photo: The renewed economic growth spurred May and early June, when millions of Americans returned to work. Another major outbreak of coronavirus facilitated acceleration, and in July. Economic growth has slowed due to various measures.
What is likely to determine the pace of growth is whether emergency unemployment benefits and other measures are in place in Washington. They end this week. Economists say the recovery will lose more steam without more aid.
Read:The “welfare economy” – federal aid prevents an even sharper collapse in GDP
What do they say? “The cost-cutting is a good start to the third quarter,” said Sal Guatieri, a senior economist at BMO Capital Markets. However “high frequency indicators show that in July. consumption has slowed due to partial reopening in several states ”.
“The second phase of the recovery is likely to be much slower, with a number of aid programs and poor management of the health crisis limiting spending on services,” said Gregory Daco, chief economist at Oxford Economics.
Market reaction: Dow Jones industry average DJIA,
and S&P 500 SPX,
had to rise slightly in Friday’s deals.