Consumer spending rises 1.9% in July

Home COVID-19 Consumer spending rises 1.9% in July

A newly released report from the Bureau of Economic Analysis (BEA) shows consumer spending in the U.S. rose 1.9%, or $267.6 billion, in July. While that’s down from spending in May and June—which grew 8.6% and 6.2%, respectively—analysts believe it represents positive movement nonetheless.

“Retail sales rose strongly in July, and this comes on the heels of tremendous surges in May and June,” said Brian Beaulieu, CEO and chief economist at ITR Economics, known for its spot-on economic forecasting. “The three-month gain since April is the strongest recorded in the post WWII period and demonstrates the consumer has an ability to spend money, a desire to spend money and the means to spend that money.”

Beaulieu’s observations are supported by the data. BEA statistics show personal income among U.S. consumers increased 0.4% to $70.5 billion last month. The increase in personal income in July was more than accounted for by compensation of employees as portions of the economy continued to reopen. Proprietors’ income and rental income of persons also contributed to the increase. Meanwhile, disposable personal income increased 0.2% to $39.9 billion. (Note: “Real personal consumption expenditures” totaled $200.6 billion in July, reflecting an increase of $82.1 billion in spending for goods and a $121.2 billion increase in spending for services.)

Within goods, the leading contributor to the increase was spending for new motor vehicles, based primarily on unit sales from Ward’s Automotive Sales Report. Within services, the leading contributors to the increase were spending for health care as well as food services and accommodations. Within health care, both hospital and outpatient services increased, based on volume data for hospital services and outpatient visits as well as credit card data. Spending for food services and accommodations was based on Census Monthly Retail Trade Survey data and Smith Travel Research data.

Government policy impacts spending
The July estimate for personal income and outlays was impacted by the response to the spread of COVID-19. Federal economic recovery payments continued but were at a lower level than in June, and government stay-at-home orders lifted in some areas of the country. The full economic effects of the COVID-19 pandemic, experts say, cannot be quantified in the personal income and outlays estimate because the impacts are generally embedded in source data and cannot be separately identified.

Partially offsetting these increases were decreases in government social benefits and income on assets. Unemployment insurance benefits, based primarily on unemployment claims data from the Department of Labor’s Employment and Training Administration, decreased in July.

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