June US Consumer Spending Flat, Factory Orders Down, Implying Rough H2
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American consumer spending and personal incomes were flat in June and factory orders declined,
according to government statistics released earlier this month,
the latest indication that the economy would continue to struggle in the second half of the year.
The Commerce Department figures, which were seasonally adjusted, showed that personal income was steady in June, compared with a slight 0.3 percent rise in May.
American consumer spending and personal incomes were flat in June and factory orders declined,
according to government statistics released earlier this month,
the latest indication that the economy would continue to struggle in the second half of the year.
The Commerce Department figures, which were seasonally adjusted, showed that personal income was steady in June, compared with a slight 0.3 percent rise in May.
It was the lowest level this year and the first time in nearly a year that personal incomes have not risen compared with previous months.
Disposable personal income, or income after taxes and expenditures, was also flat, compared with slight increases in May.
In addition to the slowdown in income and spending, the Commerce Department reported that consumers were putting away more cash.
“It reinforces the general idea that consumers are busy deleveraging and saving money,” said Dan M. Greenhaus, the chief economic strategist for Miller Tabak.
“The problem with this type of a situation, where consumers become more concerned with reducing debt and constraining spending,
is you have no idea how long it will last,” he added. “It could be one month or one year.”
The report shows that consumers are pulling back because of several factors,
including a tight job market, stock market volatility and a poor housing market,
Chris G. Christopher Jr., IHS Global Insight’s senior principal United States economist, said in an interview.
“The underlying story that I seem to be saying over and over is that consumers are not feeling good enough
to start spending on things that count, such as durables and houses, because the unemployment level is basically so high,”
Mr. Christopher said. “And firms don’t feel the need to hire.”
“These two things are feeding off of each other,” he said.
“Someone has to make a break for it. Right now the consumer is actually retrenching
so businesses are not going to have the urge to rehire.
It’s a Catch-22 situation.”
Personal expenditures were flat, after increasing 0.1 percent in May and reversing a decline of 0.1 percent in April.
The last time that figure was lower was in September 2009.
Consumer spending serves as a closely watched indicator for the pace of the recovery,
and it accounts for most of the economic activity in the United States.
The flat reading on consumer spending was weaker than analysts had estimated.
“The bottom line is the expansion in consumer spending over the past year has been moderate,
and for lots of reasons it should be constrained going forward, too,” said Steven Wieting, Citigroup’s United States economist.
“We are not in a really robust recovery that has resulted in large job gains,” he added.
In addition to the consumer spending figures, the Commerce Department reported that
factory orders declined 1.2 percent in June to a seasonally adjusted $406.4 billion.
Analysts expected a smaller drop.
The agency also revised May’s decline to a sharper 1.8 percent instead of 1.4 percent.
And the National Association of Realtors said that the number of people who had signed contracts to buy homes dropped in June.
The group said that its seasonally adjusted index of pending home sales declined 2.6 percent in June to a reading of 75.7.
The association also slightly lowered May’s reading to 77.7.
Economists surveyed by Thomson Reuters had expected the June index to increase to 78.1.
The decline reflected the reliance of the housing market on the $8,000 tax credit for buyers
who signed contracts before April 30, in pulling demand forward, economists said.
“We expect activity to eventually settle down somewhere between the inflated data spurred by the tax credit
and the depressed results that are now being reported in the immediate aftermath of the expiration of the credit,”
said Joshua Shapiro, the chief United States economist for MFR Inc., in a research note.
Economists said the picture on personal incomes had already been flagged in the report for gross domestic product,
which set growth at 2.4 percent in the second quarter, down from 3.7 percent in the previous quarter.
Consumer spending was weaker than previously thought, according to this report in the New York Times.
The recovery of the job market is pivotal to whether consumer confidence will return and the public, in turn, will spend more.
“Our own view is that the labor market recovery will be a grudging one,
that consumers will enjoy only modest gains in wages and salaries for some time,
and that consumer spending growth will therefore be moderate at best,” Mr. Shapiro said.
