– US consumption is growing strongly despite rising interest rates and high inflation
Although the US Federal Reserve recently raised interest rates from 5.25% to 5.5%, US consumers increased their spending in July by 0.8% compared to the previous month.
Despite persistently high inflation, US consumers are proving more generous. They increased their spending by 0.8% month-on-month in July, the Commerce Department said Thursday. Economists polled by Reuters had expected a gain of just 0.7%, down from an upwardly revised 0.6% gain in June. Private consumption is the mainstay of the US economy.
It did not increase as much in the spring as initially thought. Gross domestic product (GDP) grew by 2.1% annually in the second quarter. In the initial figures, 2.4% was mentioned. The U.S. Federal Reserve wants to keep inflation under control, most recently at 3.2%, without stalling the economy. It further tightened monetary policy controls in July and raised the key interest rate from 5.25 to 5.50%. It is not yet clear how things will proceed in September. The central bank wants to be guided by incoming data when making decisions.
A gauge of inflation Monetary authorities keep a close eye on consumers’ personal spending. It does not include volatile food and energy costs. The core PCE index rose to an annualized inflation rate of 4.2% in July, after 4.1% in June. The rise was expected by experts.