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Consumer spending rebounds in July, helped by strong income growth

Consumer spending rebounds in July, helped by strong income growth

Consumers returned to the malls in July after taking a breather in June, although worries about the future could make the rebound short-lived.
The Commerce Department reported Friday that consumer spending rose by 0.4 percent in July, double the June increase. The spending was supported by a solid 0.5 percent rise in incomes, the best showing in this area in four months.
The gain in spending was right in line with expectations, while the increase in incomes was double what analysts had been expected. However, economists cautioned that the July increases could be temporary given recent weakness in consumer confidence caused by a prolonged slump in housing and the past several weeks of financial market turbulence.
Financial markets are hoping that the Federal Reserve will step in to deal with the turmoil by delivering a series of reductions in the federal funds rate, the benchmark rate for millions of consumer and business loans. Federal Reserve Chairman Ben Bernanke was expected to discuss how the Fed can deal with the slump in housing at a conference on monetary policy in Wyoming on Friday.
The Fed got good news in advance of Bernanke's speech in the spending report, which showed that a key inflation gauge tied to consumer spending which excludes food and energy rose by just 0.1 percent in July. This measure of core inflation had been up 0.2 percent in June. For the year ending in July, core inflation by this measure is up just 1.9 percent _ within the Fed's preferred 1 percent to 2 percent comfort zone and well below the 2.5 percent year-over-year increase seen in February.
Investors are hoping that this retreat in inflation pressures will give the Fed the leeway to cut interest rates to protect the economy against the adverse impacts from housing and financial market turmoil.
The Bush administration, seeking to deal with criticism from congressional Democrats that it has not done enough to deal with the housing crisis, was announcing a series of initiatives on Friday to help strapped mortgage holders.


Updated : 2021-04-13 10:40 GMT+08:00