Consumers boosted spending in August as inflation continued to rise

Consumer spending rose in August, a sign that the US economic recovery is gaining strength as fall approaches.

Personal expenses on goods and services It rose 0.8% in August From the previous month, after a 0.1% decline in July, the Commerce Department reported on Friday.

Personal income rose 0.2% in August, reflecting wage gains and the federal government’s distribution of tax credits to children. The Commerce Department report noted that these were partially offset by the decline in unemployment insurance as many states ended pandemic-related supplemental payments.

The highly contagious delta type of coronavirus has been released summer slowdown In spending on meals abroad, hotels and airline tickets. However, consumers remain in a strong position to help boost the economic recovery. They have accumulated high levels of savings and benefit from abundant employment and rising wages.

“Families have enough money to spend,” said Joe Brusolas, chief economist at RSM US LLP. “Demand should remain strong for the next two to three years as growth continues well above the long-term trend.”

In the near term, supply bottlenecks could create some bumps, Mr. Brusolas said. Restrictions like Backups in US ports and outside Manufacturing Disorders persisted. The Global chip shortage The auto sector criticized this year, reducing factory production by several million cars. The Fed and economists expect these turmoil to eventually subside.

While many economists have downgraded growth forecast For the third quarter, they raised expectations for next year — noting that some spending and production were just held back by an increased delta, rather than lost and supply chain disruptions.

Congestion at the Port of Los Angeles and other shipping ports is a drag on the economy.


Photo:

Mike Blake/Reuters

Consumer spending is the largest source of economic growth in the United States and the main fuel for a rapid recovery from last year’s recession caused by the pandemic. The economy grew at an annualized rate of 6.7% in the second quarter, up from a 6.3% pace in the first quarter, revised figures from the Commerce Department showed Thursday.

Friday’s Commerce Department report showed that consumers cut their spending on long-term goods in August for the fourth consecutive month. They have cut back on vehicle purchases, which likely reflects Low stocks, high prices.

Americans’ view of the economy improved slightly in September, according to a survey conducted by the University of Michigan on Friday. The survey’s consumer confidence index rose to 72.8 in September from 70.3 in August.

Richard Curtin, the survey’s chief economist, said factors such as high inflation are weighing on consumer optimism. Mr. Curtin said consumers are delaying purchases due to what they see as a “transient price hike”. “While this reaction may wane in the coming months, the shift toward deferring buying has been too significant to be reversed quickly,” he said.

As the price rises fast Eating Americans’ wage earnings. Friday’s trade report showed that prices, excluding the volatile food and energy categories, rose 3.6% in August from a year earlier, matching annual increases in June and July. In January, before widespread reopenings and vaccinations boosted demand, core prices were only 1.5% higher than a year earlier.

Spending on services – the bulk of total expenditures – rose 0.6% in August compared to July, slowing from the previous period in the summer but still at a solid pace.

Data from private companies up to September indicates that the slowdown in spending on many services has bottomed out With Covid-19 cases declining. For example, in the week ending September 30, the number of diners sitting in restaurants fell just 7% from the same period in 2019, a less steep decline than it was earlier in the month, according to data from reservations site OpenTable.

Analysts expect the holiday season to provide a boost to spending. Nearly 30% of consumers in the United States intend to spend more during this holiday shopping season than last year, according to market research firm The NPD Group.

There were five times more travel-related internet searches in December than in August compared to the previous year, according to the digital analytics firm

similar site.

Consumers’ increased appetite for travel this holiday season is helping boost business expectations for the Foot of the Mountain Motel in Boulder, Colorado, said Alex Goyer, the motel’s general manager.

He said clients are booking stays for November and December earlier than usual. Goyer suspects that people travel to see their families during the holidays, but they are not necessarily looking to stay home with them.

Business at the Foot of the Mountain grew strongly this summer despite a slight increase in room cancellations linked to the Delta formula, Mr. Gower said. He noted that the micro motel offers people the ability to isolate in open-air accessible rooms and use contactless check-in.

“People are looking for us because of these factors during this heightened awareness of infection,” said Mr. Gower.

write to Sarah Chaney Cambone in sarah.chaney@wsj.com

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