American incomes rose more slowly last month, but for once those gains weren’t swallowed up by rising prices.
After-tax personal income increased by 0.2% in July. said on fridayThis was slower than June’s 0.7% rise. But while June’s gains were offset by a surge in prices, Americans’ inflation-adjusted income rose 0.3% in July as lower gas prices put inflation on hold.
Private consumption also cooled in July as Americans refrained from purchasing goods. Overall consumer spending rose 0.1%, its weakest since December’s decline and down from his 1% gain in June. Spending on services that recovered sharply as the pandemic subsided continued to rise, but more slowly than in previous months.
The easing in spending could be welcome news for Federal Reserve policymakers who have been trying to keep demand in check without reversing the economic recovery.
Inflation-adjusted income and expenses in the index Economists at the National Bureau of Economic Research use it to determine when a recession started. The rise in July is the latest evidence that the economy is slowing but not in recession.
Economists warn that the reprieve from inflation could be temporary. But they say households should be able to keep spending as long as employers keep hiring and wages keep rising. Wage earnings in July he rose 0.8%, the biggest gain since February. The Labor Department will provide data on his August employment and wages next weekend.
Diane Swonk, chief economist at accounting firm KPMG, said the underlying strength of the consumer economy reflects a handover from governments to the private sector, which helped households and businesses with record spending early in the pandemic. said it does. For the past year and a half.
“We have seen the private sector really pick up that baton, which is amazing,” she said.