Auto Sales Help Boost Spending

Consumer spending shot up 0.7% in June, the best showing in two months, even though Americans’ incomes rose a much more modest 0.4% during the month, the government reported Monday.

The Commerce Department said the spending gain followed a 0.1% decline in purchases during May. The strength in June came from a rebound in auto sales and higher spending in the services category.

The 0.4% rise in incomes was only enough to match the rise in consumer prices last month, which meant that Americans saw no increase in their purchasing power.

For most of the year, moderate increases in wages and salaries have been wiped out by even faster increases in inflation, a pattern which could spell trouble for consumer spending in the months ahead, economists said.

Americans’ disposable or after-tax income edged down 0.1% in June. Americans’ savings rate, savings as a percent of disposable income, fell to 3.9% in June, below the postwar record low of 4.3% set for all of last year.