U.S. consumer spending, inflation rise in June

WASHINGTON Fri Aug 2, 2013 8:50am EDT

A customer shops at a Walmart Supercenter in Rogers, Arkansas June 6, 2013. REUTERS/Rick Wilking

A customer shops at a Walmart Supercenter in Rogers, Arkansas June 6, 2013.

Credit: Reuters/Rick Wilking

WASHINGTON (Reuters) - U.S. consumer spending increased and inflation pushed higher in June, which could strengthen expectations that the Federal Reserve will curtail its bond purchases later this year.

The Commerce Department said on Friday consumer spending rose 0.5 percent, lifted by automobile purchases and higher gasoline prices. May's increase was revised down to 0.2 percent from a previously reported 0.3 percent.

June's increase in consumer spending, which accounts for more than two-thirds of U.S. economic activity, was in line with economists' expectations.

A price index for consumer spending rose 0.4 percent, the largest gain since February. It had edged up 0.1 percent in May. Over the past 12 months, inflation rose 1.3 percent, still below the Fed's 2 percent target.

The index advanced 1.1 percent in the period through May.

With prices picking up, consumer spending adjusted for inflation nudged up 0.1 percent. The so-called consumer spending, which goes into the calculation of gross domestic product, had increased by the same margin in May.

The consumer spending numbers were included in the second-quarter GDP report on Wednesday, which showed the economy grew at a 1.7 percent annual pace after expanding at a 1.1 percent rate in the first three months of the year.

Spending has been held back by an increase in taxes at the start of the year, but is expected to accelerate in the second half of the year, supported by a steady jobs market and a recovery in housing.

The economy added 162,000 jobs in July, compared to 188,000 in the previous month, the Labor Department said on Friday. Analysts polled by Reuters had forecast jobs growth of 184,000 for July.

The rise in inflation in June should provide some comfort to Fed officials who on Wednesday nodded to the potential dangers of inflation running too low, and bring them close to reducing the central bank's $85 billion per month in bond purchases.

Still, inflation remains benign. The price index for consumer spending, excluding food and energy, rose 0.2 percent in June. It was the largest increase since January and followed a 0.1 percent gain in May.

Core prices were up 1.2 percent from a year ago, rising by the same margin for a third consecutive month.

A firming labor market is helping to prop up income, which in June gained 0.3 percent after rising 0.4 percent in May.

But government salaries fell, reflecting furloughs at agencies as part of Washington's belt-tightening.

With spending outpacing income growth, the saving rate - the percentage of disposable income households are socking away - fell to 4.4 percent from 4.6 percent.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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Comments (2)
AlexJones wrote:
Inflation is criminal theft by the bankers. They should be throw in jail like in Iceland – which has seen a recovery.

Aug 02, 2013 10:38am EDT  --  Report as abuse
AlexJones wrote:
Inflation is criminal theft by the bankers. They should be throw in jail like in Iceland – which has seen a recovery.

Aug 02, 2013 10:38am EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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