US Consumer Spending Rose Less than Expected in July

U.S. consumer spending rose slightly less than expected in July and annual inflation increased at its slowest pace since late 2015, which could diminish expectations of an interest rate increase in December.

Inflation remains stubbornly low even as the labor market is near full employment, a conundrum for the Federal Reserve. Other data on Thursday showed a small increase in new applications for unemployment benefits last week amid a tightening job market.

The Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.3 percent last month after a 0.2 percent gain in June. Economists had forecast consumer spending rising 0.4 percent in July.

The personal consumption expenditures (PCE) price index excluding food and energy edged up 0.1 percent in July. The so-called core PCE price index, which is the Fed’s preferred inflation measure, has now risen by the same margin for three straight months.

In the 12 months through July, the core PCE price index increased 1.4 percent, the smallest gain since December 2015. That followed a 1.5 percent rise in the 12 months through June. The core PCE price index has undershot the U.S. central bank’s 2 percent target for the past five years.

via Reuters

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