US Auto, Retail Sales Kickstart Consumer Spending Rise

31 August 2004

After a sluggish start to the summer, US consumer spending has picked up with a 0.8% rise in July, reports the Commerce Department. This is despite only a 0.1% growth in personal incomes.

The spending rebound had been heralded by a rise in auto and retail sales [WAMN:27-Aug-04], and fuels hopes that the US economy has recovered from its recent slow spell in which growth only reached 2.8% for the second quarter of the year. Analysts have now estimated third-quarter growth at three to four per cent.

July's 0.8% rise more than compensates for a revised 0.2% fall in June (initially reported as a 0.7% decline), but the 0.1% increase in incomes is the lowest advance since November 2002.

Income growth was limited by a reduction in government payments such as health insurance, and with spending rising faster than incomes, analysts are concerned that the consumer shopping spree may be short-lived.

As more job growth will be needed to sustain such spending, attention will be on the forthcoming August jobs report due this Friday.

Data sourced from: BBC Online Business News (UK); additional content by WARC staff