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| US consumer spending climbs as incomes lag |
| Bloomberg / Washington Aug 31, 2010, 01:09 IST |
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Consumer spending in the US rose more than forecast in July, exceeding gains in incomes and indicating the economy may avoid slipping back into a recession.
Purchases rose 0.4 per cent, the most since March, after little change the prior month, Commerce Department figures showed today in Washington. Incomes climbed 0.2 per cent, less than projected, and the savings rate dropped.
Disposable incomes, or the money left over after taxes, dropped for the first time since January after adjusting for inflation, showing how the lack of jobs may prevent spending from strengthening. Companies from Intel Corp to J Crew Group Inc are cutting forecasts as unemployment and flagging confidence prompt households to scale back.
“It’ll be a real slog,” said Stephen Stanley, chief economist at Pierpont Securities in Stamford, Connecticut. “We’ll see very slow growth, but it’s a far cry from a double dip,” he said, referring to the economy lapsing into another economic slump.
Concern over the shortfall in incomes sent stocks lower, and Treasury securities climbed. The Standard & Poor’s 500 Index fell 0.5 per cent to 1,059.63 at 12.50 pm in New York. The yield on the benchmark 10-year Treasury note fell to 2.54 per cent from 2.65 per cent late on August 27.
The median estimate of economists surveyed by Bloomberg News called for a 0.3 per cent advance in spending. The 71 projections ranged from unchanged to an increase of 0.5 per cent.
Economists forecast incomes would also rise 0.3 per cent, following no change in June, according to the survey.
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