U.S. consumers boosted their spending in July, but more
slowly than in prior months as new coronavirus infections rose and the
expiration of enhanced unemployment checks loomed.
“Spending numbers have come back more than the economy as a
whole, with the help of a lot of fiscal support,” said Jim O’Sullivan, an
economist at TD Securities. “The question going forward is as fiscal support
wanes, to what extent will it weaken.”
Personal-consumption expenditures, a measure of household
spending on everything from haircuts to new cars, increased a seasonally
adjusted 1.9% in July from the prior month, the Commerce Department said
That marked a slowdown from the previous two months when it
picked up strongly after collapsing during the coronavirus-related shutdowns of
parts of the economy.
Economists say the wave of new coronavirus cases that swept
the U.S. during July weakened the nascent economic recovery, even though nearly
two million Americans joined the workforce.
Charlie Stout, owner of Cincinnati Dry Carpet Cleaning, put
off a planned boat purchase this year because of the coronavirus pandemic. He
also had to let go of two of his eight part-time workers.
“So I couldn’t buy my boat; this year a lot of people lost
their jobs, so I’m fortunate,” the 34-year-old said.
Mr. Stout said “things have definitely improved” since March
and “instead of buying something I would use as a leisure expense, I’m using
the money to expand my business.”
Economists say consumer spending in the months ahead will be
clouded by the July 31 expiration of the $600 weekly federal supplement to
unemployment benefits for workers laid off during the coronavirus pandemic,
which provided a key economic lifeline for many households.
Congressional Democrats and White House officials have been
at an impasse for weeks about another round of federal relief, amid
disagreements over how much jobless aid to provide and funding for states and
cities. House Speaker Nancy Pelosi (D., Calif.) and White House chief of staff
Mark Meadows spoke on the phone Thursday for 25 minutes, but made no
President Trump signed an executive order Aug. 8 to offer
$300 a week in federally funded enhanced unemployment benefits and called on
the states to kick in an additional $100 a week, but left it to the states to
decide whether to participate. The states that join the program will take an
average of three weeks to send out the money, the Labor Department estimates.
“The end of the $600 and slow rollout of half of that is
certainly going to impact spending,” said Joshua Shapiro, chief U.S. economist
at MFR Inc.
Recent data through August from private firms suggest
consumer spending overall appears to have made up much of the ground lost
during the worst of the pandemic, though the recovery is uneven across the
country and might have flattened out.
Earnest Research, a data analytics firm tracking U.S.
consumer spending, found no real acceleration in total spending from July to
August and significant disparities from state to state.
Grocery shoppers cut back on spending in August, data show,
a sign many Americans are hurting for cash as the federal unemployment stimulus
remains on hold for most recipients. Restaurant bookings and travel spending
also remain depressed.
Meanwhile, many households are still earning more than they
are spending during the pandemic, which economists say could fuel consumer
spending in coming months. The personal saving rate was 17.8% in July, down
from 19.2% in June and 24.6% in May but well above the 7.6% rate seen in
Consumer spending accounts for more than two-thirds of U.S.
economic output, making it a key driver of the economy. Friday’s report showed
overall consumer spending in July remained 4.6% below February’s prepandemic
But the report also confirmed recent data showing Americans’
retail shopping through July had surpassed prepandemic levels.
Similar trends are visible in other economies. France’s
statistics agency Friday said household goods purchases rose 0.5% in July,
lifting spending above February’s level. In Spain, retail sales rose by 1.1% in
July, although spending had yet to return to February levels.
U.S. spending on services, which often involve close
person-to-person contact like a visit to the dentist’s office, was still
hovering below February levels, however, the Commerce Department said.
While new coronavirus infections in the U.S. appear to now
be declining from the highs recorded in July, recent measures of consumer
sentiment are mixed, suggesting households are hesitant about their economic
The University of Michigan said Friday its final index of
consumer sentiment was 74.1 this month, up slightly from July’s reading of
Since coronavirus-related shutdowns, “a sizable number of
consumers thought conditions could hardly get any worse,” said Richard Curtin,
the survey’s chief economist. “The natural response was that economic
conditions would improve given the absence of any negative economic causes for
However, the Conference Board, a private research group, on
Tuesday said its consumer-confidence index dropped sharply in August to 84.8
from 91.7 in July. It also warned that households’ increasing concerns about
the economic outlook and their financial well-being will likely cause spending
to cool in the months ahead.
Hiring increased in July for the third consecutive month,
with employers adding 1.8 million jobs, although the improvement appears to be
halting. Initial jobless claims declined by 98,000 to 1 million in the week
ended Aug. 22, the Labor Department said Thursday, signaling layoffs continue
as the coronavirus hampers a smooth economic recovery.
The Commerce Department also reported Friday that personal
income—reflecting Americans’ pretax earnings from wages, salaries, investments
and other sources—increased 0.4% last month after declining 1% in June and 4.2%
Nicky DeClerico, a retired postal-service worker in
Philadelphia, said the Federal Reserve’s interest-rate cuts earlier this year
were “a big hit to savings” that caused his total monthly income to drop by
“Interest-rate reductions are just killing savings...markets
get everything and savers get nothing,” the 63-year-old said. He has also cut
back on travel and stayed at home more because of the pandemic.
Mr. DeClerico has been looking to relocate to Wilmington,
Del., but “everything is inflated—housing, asset prices—it’s like we’re being
—Jeffrey Sparshott and Paul Hannon contributed to this
Write to Harriet Torry at email@example.com
here for the original article.