In a positive sign for the economy, consumer spending in the U.S. rose by 0.5% in June, backed by a decline in inflation and continuous growth. Analysts had predicted a similar increase, further highlighting the improving economic conditions.
Moreover, incomes also showed growth with a 0.3% increase in June, as reported by the government on Friday. This rise indicates that individuals had more disposable income to contribute to consumer spending.
As the main driving force behind the U.S. economy, consumer spending has remained robust, with households increasing their spending by an annual pace of 1.6% from April to June. Notably, spending has consistently increased for seven consecutive months.
The favorable job market, characterized by low unemployment rates and rising wages, has instilled confidence among Americans, prompting them to increase their discretionary spending. Services like dining out, travel, and recreation have been the biggest beneficiaries of this trend.
However, most economists anticipate a slowdown in consumer spending as interest rates continue to rise. The impact of these higher rates on the economy remains uncertain, and it is unclear if it could eventually tip the U.S. into a recession.
In response to these positive economic indicators, the Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) were set to start the day with higher trading values on Friday.