US consumers curtailed their expenditures in July as inflation persisted at elevated levels, according to new data released by the Commerce Department on Wednesday. Consumer spending, adjusted for inflation, remained unchanged from the previous month, marking a significant deceleration from the 0.4% increase observed in June, as indicated by the report. The Personal Consumption Expenditures price index – the gauge used by the Federal Reserve for its 2% target inflation rate – rose 0.2% from June, maintaining the annual rate at 3.7%, according to the report.
Economists anticipated a 0.1% rise in the PCE price index from the previous month, with projections for the annual rate to decelerate to 3.6%, as per FactSet estimates. Excluding the more erratic energy and food prices, the “core” PCE index experienced a monthly increase of 0.2% and showed a year-over-year rise of 3.3%. The PCE price index constitutes a component of the Commerce Department’s monthly Personal Income and Outlays report, which encompasses detailed data regarding the earning, spending, and saving behaviours of Americans.
The July spending pullback among US consumers coincided with an increase in their household savings. The saving rate, which declined to a four-year low of 2.6% in June, rebounded in July to 3%. Robust income increases provided a cushion for those savings in the previous month. After-tax income increased by 0.4%, marking the most significant rise since January, a month traditionally characterised by enhancements in incomes due to Social Security adjustments and annual wage modifications.
