Ahead of the Bell: US consumer spending

US consumer spending likely posted modest gain in June but well off May pace

Associated Press
US consumer spending edges up in June
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In this Friday, June 12, 2015 photo, butcher Jorge Gonzalez, back, waits on a shopper at a local grocery store in the Little Havana area of Miami. The Commerce Department releases its June report on consumer spending, which accounts for 70 percent of economic activity, on Monday, Aug. 3, 2015. (AP Photo/Alan Diaz)

WASHINGTON (AP) -- The Commerce Department releases its June report on consumer spending, which accounts for 70 percent of economic activity, at 8:30 a.m. Eastern on Monday.

SALES UP: The expectation is that spending rose 0.2 percent, according to a survey of economists by data firm FactSet.

SALES AND INCOME: In May, U.S. consumer spending surged 0.9 percent. It was the biggest monthly increase in nearly six years and was seen as a sign of stronger economic growth to come. Income growth rose a solid 0.5 percent in May, and economists believe incomes will rise another 0.3 percent in June.

Economists expected consumer spending to slow in part because of indications that retail sales were weaker in June, falling 0.3 percent, the poorest showing since February's harsh winter weather kept shoppers away from the malls.

However, for the full April-June quarter, consumer spending posted a solid gain, rising at an annual rate of 2.9 percent, much stronger than the 1.8 percent growth rate for spending in the first quarter.

The improvement in consumer spending was the biggest factor boosting overall growth, as measured by the gross domestic product, to 2.3 percent in the second quarter. That was up from a revised 0.6 percent GDP increase in the first quarter.

Through the first six months of this year, the economy has grown a modest 1.5 percent but economists believe solid gains in employment will likely double that growth figure to around 3 percent in the second half of the year.

The Federal Reserve last week cited gains in consumer spending, the labor market and housing as evidence the economy is improving. But Fed officials kept a key borrowing rate at a record low near zero, where it has been for almost seven years. Some economists believe further gains in the economy and an acceleration of inflation, which has been running below the Fed's 2 percent price target, will prompt officials to begin raising rates later this year.

Some economists think the first rate hike will occur at the next Fed meeting on Sept. 16-17, but other analysts believe it could be December before Fed officials will feel confident enough about the economy to begin raising rates.

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