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US consumer spending up 0.2 percent in June, weakest gain in 4 months; income rises

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WASHINGTON — Consumer spending in June rose by the smallest amount in four months as shoppers cut back on purchases of cars and other big-ticket items.

Consumer spending edged up 0.2 percent in June, the poorest showing since a similar increase in February, the Commerce Department reported Monday.

The modest advance followed a revised 0.7 percent rise in spending in May. The increase had been driven by heavy spending on autos. But in June, auto sales slowed. Overall purchases of durable goods, the category that covers autos, fell 1.3 percent in June.

Personal income rose 0.4 percent for a third straight month, reflecting strong employment gains.

Economists didn't appear too concerned about the June spending slowdown.

"We still expect that a strengthening labor market will support spending growth in the second half of the year," said Paul Dales, senior U.S. economist at Capital Economics.

He said he was looking for a solid gain in jobs of around 250,000 in July, which will help fuel further income gains. The government will report on July employment on Friday.

With income rising faster than spending, the personal saving rate climbed to 4.8 percent of after-tax income from 4.6 percent in May.

An inflation gauge closely watched by the Federal Reserve rose by 0.1 percent in June, the same as in May. Over the past 12 months, this price gauge is up just 0.3 percent, reflecting big declines in oil prices. Prices excluding food and energy are up just 1.3 percent.

Those figures are well below the Fed's 2 percent target for annual increases in inflation.

For the full April-June quarter, consumer spending posted a solid gain, rising at an annual rate of 2.9 percent, much stronger than the 1.8 percent growth rate for spending in the first quarter.

The improvement in consumer spending was the biggest factor boosting overall economic growth to 2.3 percent in the second quarter. That was better than a 0.6 percent expansion in gross domestic product in the first quarter.

Through the first six months of this year, the economy grew a modest 1.5 percent. But economists believe the figure will jump to around 3 percent in the second half of the year.

The Federal Reserve last week cited gains in consumer spending, the labor market and housing as evidence the economy is improving. But Fed officials kept a key borrowing rate at a record low near zero, where it has been for almost seven years.

Economists believe further gains in the economy and an acceleration of inflation, which has been running below the Fed's 2 percent price target, will prompt officials to begin raising rates later this year.

Some analysts say the first rate hike will occur at the next Fed meeting on Sept. 16-17, while others believe it could be December before Fed officials will feel confident enough about the economy.

PHOTO: In this Friday, June 12, 2015 photo, butcher Jorge Gonzalez, back, waits on a shopper at a local grocery store in the Little Havana area of Miami. The Commerce Department releases its June report on consumer spending, which accounts for 70 percent of economic activity, on Monday, Aug. 3, 2015. (AP Photo/Alan Diaz)
In this Friday, June 12, 2015 photo, butcher Jorge Gonzalez, back, waits on a shopper at a local grocery store in the Little Havana area of Miami. The Commerce Department releases its June report on consumer spending, which accounts for 70 percent of economic activity, on Monday, Aug. 3, 2015. (AP Photo/Alan Diaz)

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