Numbers: Americans increased spending on a variety of goods and services in June as more people returned to work and massive state aid infusions flowed through the economy, but progress seems to have slowed recently following the recent surge in coronavirus cases.
Personal spending jumped 5.6% in June, the government said on Friday, following a revised advance of 8.5% in May.
Revenues fell 1.1% – slightly more than expected – due to lower federal family benefits.
The government sent one-off incentive checks to most families in May as part of Washington’s unprecedented efforts to keep working people or provide them with even more unemployment benefits during the worst health crisis in a century. More aid was distributed in June, but not so much.
Read:The economy experienced a titanic decline of 32.9% in the second quarter, indicating a decline in recovery
Meanwhile, the meticulous inflation rate, meanwhile, has reached its largest increase in three years due to a significant increase in gasoline prices. The PCE index, the predominant infrastructure barometer of the Federal Reserve, rose 0.4%.
The annual inflation rate was quite low, however, less than 1%.
What happened: Consumers spent more on new cars and trucks, clothing, gasoline and recreation as the economy recovered significantly. Americans also spent more on medical care, returning to hospitals for non-coronavirus-related treatment.
However, spending is well below pre-crisis levels, as so many Americans are out of work and others are concerned about their financial security.
Read:Unemployment claims rise for the second week in a row as US economic activity slows
Extremely high savings fell to 19% from 24% in May. Households saved at record levels only if the economy or their own situation worsened.
Inflation, for its part, has so far posed a threat to the economy.
Although the cost of some basic products, such as gas and food, has risen, most companies have had to lower prices for goods and services to generate sales after falling demand at the start of the pandemic.
Read:Consumer confidence declines in July and indicates a faster economic recovery
The inflation rate for the last 12 months has risen to 0.8% from 0.5%, according to the PCE index. But this is much lower than in January by 1.9%.
A separate food and energy-depleting inflation rate, known as the base rate, rose 0.2% in June. However, it has grown by only 0.9% over the last year and is almost at its lowest level since the Great Recession a decade earlier.
See: MarketWatch economic calendar
Big picture: The economic recovery led to a recovery in May and early June, when millions of Americans returned to work. Another major outbreak of coronavirus has led to a recovery in momentum, and various measures have shown that economic growth declined in July.
What is likely to determine whether growth will grow again is whether Washington will continue unemployment benefits and other measures. They end this week. Without more help, economists say, the recovery is likely to lose more steam.
Read:“Mass welfare economy” – federal aid prevents an even more abrupt collapse of GDP
What are they saying? “Reducing costs provides a good starting point for the third quarter,” said senior economist Sal Guattieri of BMO’s capital markets. And yet “high-frequency figures suggest a slowdown in July due to a partial rollback of re-discoveries in several states. “
“With a number of care programs and a health crisis that limits spending on services, the second phase of recovery is likely to be much slower,” said Gregory Daco, chief economist at Oxford.
Market reaction: Professional middle DJIA Dow Jones,
and S&P 500 SPX,
in Friday’s auction intended to rise slightly.