INTERNEWSTIMES.COM – The US economy continues to show signs of resilience, with consumer spending holding steady in August despite a cooling labor market. The Commerce Department’s Bureau of Economic Analysis reported on Friday that consumer spending, which accounts for a significant portion of the US economy, rose by 0.2% last month, following a 0.5% increase in July.
While this growth is moderate, it suggests that the economy has retained some momentum in the third quarter. Economists had anticipated a slightly higher increase of 0.3%.
The continued strength in consumer spending is attributed to solid wage gains, despite a recent slowdown in the labor market. Revised national accounts data released on Thursday showed stronger wage and salary growth in the second quarter than previously estimated. The saving rate also turned out to be higher than initially thought. These positive developments in income and savings suggest that consumer spending may remain robust for the rest of the year.
Concerns had arisen that consumers were relying on their savings to fund spending. With the unemployment rate rising above 4%, there were fears that consumers would prioritize saving, leading to a decline in spending.
However, the Federal Reserve’s decision last week to cut its benchmark overnight interest rate by 50 basis points, the first reduction since 2020, appears to be easing those concerns. Fed Chair Jerome Powell emphasized that the rate cut aimed to demonstrate the central bank’s commitment to maintaining a low unemployment rate.
Growth estimates for the third quarter are currently around a 2.9% annualized rate, with consumer spending expected to mirror the pace set in the April-June quarter. The economy expanded at a 3.0% rate in the second quarter.
The combination of steady consumer spending and easing inflation pressures suggests that the US economy is navigating a challenging period with a degree of stability. However, the ongoing uncertainty surrounding the labor market and the potential for future interest rate adjustments will continue to be closely monitored. (Red)
