United States consumer spending unexpectedly dropped last month for the very first time since the beginning of the first quarter, according to data released Friday by the Commerce Department. Household purchases fell 0.1 percent, down from the 0.4 percent increase from the previous month. Incomes slightly rose by only 0.2 percent.
The statistics indicate that spending on durable goods – this consists of cars and trucks – declined 0.6 percent after jumping 0.5 percent in June. Non-durable goods spending, such as clothing and fuel, also decreased 0.2 percent. Household outlays for services shrank 0.1 percent.
The paucity of consumer spending growth has been attributed to tight credit and wages not growing sharply, which is leaving households unable to keep up with the rate of inflation. Economists purport that the labor market needs to be revived in order to boost earnings and help amplify outlays at retailers.
Prices related to consumer spending, meanwhile, received a sharp boost of 1.6 percent in the year ending July, which is slightly below from the Federal Reserve’s target of two percent.
It should be noted that none of the economists in a Bloomberg survey projected a decrease.
Americans’ pessimism rises
Friday’s data came as a new survey suggested that pessimism of the economy has relatively grown since the Great Recession. The Rutgers University study reported that nearly three-quarters (71 percent) of Americans think the recession wielded a permanent hindrance on the national economy, this is up substantially up from the 49 percent in Nov. 2009.
In addition, 42 percent of respondents reported having less pay and savings than prior to the beginning of the recession in late 2007. In fact, only seven percent say their significantly better off since the recession.
Experts aver that Americans’ patience is wearing thin because there has been very little improvement in the overall economy as there is still a difficult labor market, interest rates remain artificially low, wages are stagnant and the overall cost of living is increasing.