story by Alex Kowalski
Americans stepped up spending in July for the first time in three months as an increase in incomes helped make up for a jobless rate stuck above 8%.
Purchases increased 0.4% after being little changed in June, Commerce Department figures showed today (Aug. 30) in Washington. Other reports today showed consumer confidence held close to a seven-month low, and claims for unemployment benefits were unchanged.
Stronger household spending is fueling sales at retailers such as Gap Inc. and may set the stage for a pickup in economic growth. At the same time, more expensive gasoline may prompt shoppers to watch their wallets, while a slowing global economy makes employers cautious about hiring.
“The consumer’s situation is slowly improving, but the job growth isn’t there to support really big gains in future spending,” said Gus Faucher, a senior economist at PNC Financial Services Group Inc. in Pittsburgh, who correctly forecast the increases in purchases. “The quarter is getting off to a decent start.”
U.S. stocks retreated, trimming the third straight monthly advance for the benchmark Standard & Poor’s 500 Index, as reports from Europe and Asia intensified concern the global economy is cooling. The S&P 500 fell 0.8% to 1,399.48 at the close of trading in New York.
Economic confidence in the 17-nation euro area fell more than economists forecast in August as the region’s slump deepened.
The median estimate of 76 economists surveyed by Bloomberg called for a 0.5% gain in U.S. consumer spending. Projections ranged from increases of 0.2% to 0.7%.
Incomes climbed 0.3% for a third month. Because spending rose more than incomes, the saving rate fell to 4.2% from 4.3% in June, the highest level in a year.
An early indicator of consumer spending, retail sales, rose 0.8% in July, the most in five months, Commerce Department data showed Aug. 14. Receipts climbed in all 13 sales categories, the first time that’s happened since 2005.
Same-store sales for the more than 20 retailer tracked by Swampscott, Mass.-based Retail Metrics rose 2.7%, beating the average estimate for a 1.8% gain.
“The back-to-school business has been really quite good,” Ed Stack, chairman and chief executive officer of Dick’s Sporting Goods Inc., said during an Aug. 14 earnings call. The Coraopolis, Pa.-based retailer this month boosted its forecast for full-year earnings.
Consumer spending will increase at a 2% rate in the third quarter, according to the median forecast of 78 economists surveyed by Bloomberg from Aug. 3 to Aug. 8.
Faster growth driven by household spending will probably hinge on bigger job gains. Gasoline prices present an additional obstacle. The average price of a gallon of regular gasoline climbed 28 cents since July 30 to reach $3.80 on Aug. 28, according to AAA, the nation’s largest auto club.