By Alice Seeley
According to a report from the U.S. Department of Commerce released on Aug. 26, consumer spending rose by 0.1% in July from the previous month. This is a slowdown from the 1% increase in June.
Economists polled by the Wall Street Journal predicted a 0.5% increase in spending in July. The slowdown was caused by widespread inflation. Department reported that in July, food prices increased by 1.3% from June while energy prices decreased by 4.8%.
The national average gas price dropped to $3.85 after reaching an all-time high of above $5 in June.
In addition, goods increased by 0.2% in July, a slowdown from the 1.5% surge in June. Spending on services increased by 0.3% after rising by 0.7% the previous month. After taxes, personal income also slowed, only rising by 0.2% in July compared to the 0.7% growth in June.
This slowdown in spending could lead the Federal Reserve to revise its plan for more rate increases this year.
“With gasoline prices on track for an even larger fall than in July, and mounting signs that core goods inflation is stepping down, we suspect that could clear the way for a smaller 50 basis points hike in September,” said Michael Pearce, a senior U.S. economist at Capital Economics.
