U.S. household incomes rose by a robust 1.1% in July while consumer spending growth slowed to a 0.3% pace, the Commerce Department reported Friday, suggesting the economic recovery lost some momentum amid a wave of infections tied to the Delta variant of the Covid-19 virus.
The increase in spending was less than a third of June’s gain, according to the Commerce Department. Households broadly boosted spending on services while cutting spending on goods.
The gain in income—reflecting Americans’ earnings from wages, investment returns and government relief programs—was driven by wage increases and government aid, the Commerce Department said. It was far bigger than analysts had expected, and suggests the economy could be primed for stronger growth later this year and next.
Meanwhile, inflation pressures eased, though they remained elevated. Consumer prices rose 0.4% last month, lower than the prior month’s 0.5% gain, according to the Federal Reserve’s preferred inflation gauge. Core prices, which strip out food and energy costs, increased 0.3% in July from a month earlier, lower than June’s 0.5% gain.
Americans have been shelling out more this summer to travel, dine out, and attend concerts, museums and conferences—activities they had put off for most of the pandemic. But there are signs that such spending is taking a hit and affecting businesses, undermined by consumer fears tied to the Delta variant, staffing shortages and persistent bottlenecks in global shipping networks.
