US consumer spending buoys on solid service sectors as inflation pushes higher

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US consumer spending buoys on solid service sectors as inflation pushes higher

On Friday, US Commerce Department data had revealed that US Consumer Spending, the élan vital of US economy accountable for roughly a two-third of entire economic activities, had surged robustly last month as an acceleration in vaccination drive had ramped up demands for services related to travel and tourism sectors which reportedly had borne the heaviest brunt of the pandemic’s fiscal fallouts last year, however, much of the gains in consumer spending had been related to a price-hike as the United States’ annualized inflation rate widens its distance further from US Fed’s target of 2.0 per cent.

Apart from that, although, personal income remained almost unchanged last month, other economic data released earlier in the day had unveiled that the US labour market’s wage growth had accelerated by the steepest pace in more than 13 years on a year-on-year basis in June.

Aside from an acceleration in wage growth, an increase in household wealth alongside pandemic-led savings would likely to keep consumer spending stronger in near- to intermediate-term, suggested analysts.

US Consumer Spending soars 1.0% in June, inflation ticks up

According to US Commerce Department, US Consumer Spending had sharply bounced back by 1.0 per cent last month following an unprecedented decline of 0.1 per cent in May, while the US Federal Reserve’s key inflation indicator, core PCE Price Index (Personal Consumption Expenditure) rose 0.4 per cent in June and shot up to 3.5 per cent on an annualized basis, well above the US Fed’s target of 2.0 per cent.

Besides, personal incomes rose by 0.1 per cent, while savings declined as much as 9.4 per cent amid a blistering inflation-surge what the US Fed claimed would be ‘transitory.’ Meanwhile, addressing to a salubrious US economic outlook in a near term, a senior economist at Moody’s Analytics in West Chester, Pennsylvania, Scott Hoyt said, “The overall trend of healthy-to-strong growth will continue into next year.

Downside risks remain large. The return of shutdowns from increased infections is unlikely, but cannot be ruled out. There are also upside risks, especially given all the extra saving since the spring of 2020”.