Consumer spending, a top economic motivator, made its biggest jump in five months – but uncertainty over rising gas prices, still-high unemployment, a looming fiscal cliff and the election threaten to keep growth subdued.
Personal consumption expenditures rose 0.4% to $46 billion in July, the Commerce Department said. In the previous month, the measure barely rose.
The uptick in spending likely resulted from rising incomes, which grew 0.3% in July – slightly less than in June but continuing the gauge’s 8-month run of gains.
Americans saved less in July, at a 4.2% rate compared with June’s 12-month high of 4.3%.
“A higher saving rate is usually a sign of more consumer caution/lower consumer confidence, and we had disappointment on that front earlier this week,” wrote Jonathan Basile, economics director at Credit Suisse, in a report Thursday.
Many consumers are still wary of instability in the economy. Though incomes in the second quarter got a 4.2% boost, representing much stronger growth than most of 2011, the increase was smaller than the first quarter’s 6.6% swell.
And spending in the most recent quarter escalated 2.4% -- the weakest quarterly expansion in years.
On Wednesday, the government said the nation’s gross domestic product expanded at an annual rate of 1.7% in the second quarter – higher than expected but also the slowest growth since last summer.
Corporations continue to perform better than households. Bank profits alone made a nearly 21% year-over-year improvement in the second quarter.
But consumer confidence in August slid to its lowest level since late last year, driven by concerns about where the economy is headed, according to the Conference Board. Jobless claims were flat last week, suggesting continued lethargy in the employment market.
One bright spot, however: The back-to-school shopping rush caused retail sales to surge 3.6% in August, beating analyst expectations, Thomson Reuters revealed Thursday.
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