Title: US Consumer Spending Growth Slows, Fueling Case for Further Fed Rate Cuts
Investing.com -- In August, US consumer spending grew at a slower rate than expected, signaling potential pressure on the economy and increasing the likelihood of additional interest rate cuts by the Federal Reserve. This data, released by the Commerce Department's Bureau of Economic Analysis, shows that consumer spending only increased by 0.2% in August, down from the previous month's 0.5% gain. Economists had predicted a 0.3% increase.
Household income growth also slowed unexpectedly to 0.2% from 0.3% in July, falling short of the anticipated 0.4% rise. Despite these slowdowns, Kathy Jones from Charles Schwab noted that the numbers are "slowing but not falling off a cliff," with wage gains continuing to support consumer spending.
Inflation pressures also eased, with the Personal Consumption Expenditure (PCE) price index rising by only 0.1% on a monthly basis, below estimates of a 0.2% increase. Year-on-year, the PCE index slowed to 2.2%, below projections of 2.3% and 2.5% in July. Excluding volatile items like food and fuel, the core PCE index decelerated to 0.1% month-on-month and slightly accelerated to 2.7% on an annual basis.
These data points come after the Federal Reserve recently cut interest rates by 50 basis points and indicated that more cuts could follow later in the year. Fed Chair Jerome Powell justified the larger-than-expected rate cut as a measure to provide additional support to labor demand.
In conclusion, the slowing consumer spending growth and easing inflation pressures are key indicators of potential economic challenges ahead. The likelihood of further interest rate cuts by the Federal Reserve could impact borrowing costs and overall economic activity. It is important for individuals to stay informed about these developments and consider how they may affect their personal finances and investment decisions.