Inflation-adjusted consumer spending falls in June

WASHINGTON, Tue Jul 31, 2012 – Spending by American consumers fell in June for the first time in nearly a year when accounting for inflation, suggesting the economy lost momentum as it ended the second quarter.
Consumer spending, which makes up about 70 percent of economic activity, fell 0.1 percent when adjusted for rising prices, the Commerce Department said on Tuesday.
Before making price adjustments, spending was flat. That was just below the median forecast in a Reuters poll of 0.1 percent increase.
Pressure is rising on policymakers at the Federal Reserve to do more to help the sputtering economy. The faltering recovery also weighs on President Barack Obama’s hopes of reelection in November.
The Commerce Department had already reported that economic growth slowed over the entire second quarter as consumers spent at their slowest pace in a year. But Tuesday’s data showed consumer spending lost momentum throughout the period when taking inflation into account.
Household income rose in June by 0.5 percent – the most in three months – although consumers socked away part of the extra cash by saving more.
Analysts had expected a gain of 0.4 percent. After tax income climbed 0.3 percent in June when accounting for higher prices.
With price-adjusted incomes rising in June and consumption falling, the saving rate for households rose to 4.4 percent, its highest level in a year.
A report on Friday is expected to show the jobless rate holding at 8.2 percent in July. It has been above 8 percent since February 2009 – nearly all of Obama’s time in office so far.