Consumer Spending Up

While consumer spending suggests the economy is looking up, applications for unemployment benefits remain steady.

Consumer spending had a firm start in the third quarter, rising by the most in five months and offering hope economic growth could pick up this quarter, Reuters reported.

Consumer spending increased 0.4% after a flat June, according to the Commerce Department. Last month’s rise in consumption, which accounts for 70% of U.S. economic activity, was in line with economists’ expectations. When adjusted for inflation, consumer spending increased 0.4%, also the largest increase since February.

“The improvement in spending activity suggests that overall economic activity may be off to a fairly decent start in the third quarter,” Millan Mulraine, senior macro strategist at TD Securities in New York told Reuters.

But a second report from the Labor Department showed first-time applications for state unemployment benefits were unchanged at 374,000. Reuters also noted the four-week moving average for new claims—a better measure of labor market trends—rose 1,500 to 370,250. Jobless claims have climbed by 10,000 in August, after payrolls increased 163,000 in July from 64,000 in June.

While data on consumer spending and housing suggest that economic activity grew early in the third quarter, the state of the labor market could determine whether the Fed offers additional monetary stimulus to the economy at its Sept. 12-13 policy meeting.

 

 

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