July 31, 2019

Newsy Today


Consumers Maintains Confidence Expenditure Out Soft Inflation

WASHINGTON – Consumers continued to wear a healthy clip and stayed confident about the summer heading and the inflation remained soft, the decisions could reinforce the Federal Reserve's prospective decision to lower interest rates t later this week.

Personal consumption expenditure – a measure of household spending on everything from airline tickets to furniture – increased in June to 0.3% seasonally adjusted from the previous month, the Department of Commerce said Tuesday. The estimated rate of seasonal inflation, the PCE price index, is below 0.12% below the monthly speed required to achieve the central bank's 2% annual inflation target.

Meanwhile, the consumer attitude changed in July, suggesting that Americans would remain confident about the US economy despite continued trading tensions and slowing global growth. The Board of Congress, a private research group, said its confidence index jumped to 135.7 in July, up from 124.3 in June.

The readings were the last major economic points seen by nutrition officials before their policy meeting on Tuesday and Wednesday. The expenditure and inflation figures broadly reflect the expectations of economists, the data is unlikely to reduce the central bank's break in its benchmark subsistence funds from its current range of 2.25% to 2.5%.

“These numbers are in line with the fact that the Joint Committee is really saying how the basic principles are good but the risks are still below,” said Augustine Faucher, chief economist of The PNC Financial Services Group. .

In recent years, consumer spending, fueling around two-thirds of US economic activity, has been strong during the year. While disbursements slowed down in June, low unemployment and strong income growth in recent months suggest that consumers have a fundamental basis for this expansion, ”said Mickey Levy, chief economist at Berenberg Capital Markets, in a note.

Mike Berge, general manager at High Energy Sports, Inc., in Anaheim, Calif., Said that the company has grown “very steady” in related business with zipline, gliding gliding and parachute equipment, which he put in. increased demand for sports and leisure activities.

“People get tired of the hustle and they want to quit. Instead of spending $ 2,000 on a handbag, people said they would prefer to go to a holiday resort ”for recreational activity or life experience, Mr Berge said.

For draft policy makers concerned about the emergence of low inflation, a mixed message arrived on Tuesday.

While the overall PCE price index was weak, underlying price indications showed that there was ratification. Its counterpart increased by 0.25% in June since May, the core price index of SNP – which does not include food and energy volatility prices – which both reduced. This brought the gains over the last three months up to an annual speed of 2.48%, the fastest clip in more than a year.

Assisting in supporting core inflation in June, financial services were paid and paid – two components nominated by Fed Chairman Jerome Powell earlier this year as factors contributing to an unforeseen slowdown in price pressures. Paul Ashworth, chief US economist at Capital Economics, said the most important thing was that policy makers could find the inflation low.

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“It seems that, if anything, heart inflation could be a little stronger than we thought in the second half of the year – nothing dramatic but it certainly went back to the 2% target,” he said. Mr Ashworth.

It is likely that it will take a number of other months of construction price pressure to alleviate the concerns of policy makers about weak inflation. Recently Mr Powell and other FED officials mentioned that inflation under target of strong economic growth and low unemployment could erode prospects for future price increases. This could lead to a real spin as businesses and consumers change price behavior and pay settlement.

Policy makers aim to create 2% inflation to create an adequate buffer against deflation, or falling prices, in a downturn.

The broad PCE price index was just up 1.35% in June from a previous year, the weakest reading in almost three years. The core index was up 1.6%.

Write Paul Kiernan at paul.kiernan@wsj.com and Harriet Torry at harriet.torry@wsj.com

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