U.S. consumer spending rose more than expected in June as households bought a range of goods and services, suggesting consumption will likely remain strong after surging in the second quarter, Reuters reports.
Despite healthy consumer spending, today’s report from the Commerce Department showed inflation is still muted. As a result, a cautious Federal Reserve could keep interest rates at current low levels for a while.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.4% in June after a similar gain in May. Economists polled by Reuters had forecast consumer spending advancing 0.3%.
When adjusted for inflation, consumer spending rose 0.3% after climbing 0.2% in May.
The dollar trimmed losses against the euro and yen after the data. Prices for U.S. government debt also pared losses, while U.S. stock futures were trading lower.
The June data was included in last week’s second-quarter gross domestic product report, which showed that consumer spending rose at a 4.2% annual rate, the fastest in nearly two years. That jump accounted for almost all of the economy’s 1.2% growth pace during the period.
While the second quarter’s robust pace of consumer spending will probably not be sustained, economists are optimistic that spending will remain solid, underpinned by steadily increasing wages as the labor market tightens, as well as rising house and stock market prices.
There was little sign of inflation in June. The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, rose 0.1% in June after a 0.2% gain in May.
