U.S. consumer spending up 0.4% in July

U.S. consumer spending posted the largest increase in four months in July, primarily driven by a surge in auto sales, the Commerce Department reported Monday.

Consumer spending, which accounts for about 70 percent of the overall economy, rose 0.4 percent in July from a month earlier, while personal incomes increased 0.2 percent. Both consumer spending and personal incomes showed zero increase in June.

In addition, consumers' willingness to save seem to have retreated a little bit during the month, with savings rate dropping to 5.9 percent from 6.2 percent in June. Even with the July decline, the savings rate is nearly three times higher than it was before the recession began in December 2007.

July's gain in consumer spending exceeded a 0.3-percent rise economists had projected. Consumer spending remained sluggish in recent months, as consumers are more cautious in purchasing amid uncertain economic prospect and lackluster job growth. Instead, they are more inclined to save or trim their debt to repair balance sheets that were shattered during the recession.

The U.S. Commerce Department on Friday revised the economic growth to an annual rate of 1.6 percent in the second quarter of this year from an initially estimated pace of 2.4 percent. But consumer spending was revised upward to a growth rate of 2.0 percent, compared to the previously reported 1.6 percent.

"Consumers are reducing their debt and building savings, returning household wealth-to-income ratios near to longer-term historical norms, " Federal Reserve chairman Ben Bernanke said Friday at the Fed annual retreat in Jackson Hole, Wyoming.

"Stronger household finances, rising incomes, and some easing of credit conditions will provide the basis for more rapid growth in household spending next year."

Source: Xinhua