– US consumption is growing strongly despite high interest rates and high inflation
US consumers increased their spending in July by 0.8% compared to the previous month, even though the US Federal Reserve recently raised interest rates from 5.25% to 5.5%.
Although inflation rates remain high, US consumers have proven to be quite generous. The Commerce Department said Thursday that they increased their spending in July by 0.8% month-on-month. Economists polled by Reuters had expected an increase of just 0.7%, down from an upwardly revised increase of 0.6% in June. Private consumption is the mainstay of the American economy.
This did not increase as much in the spring as initially thought. GDP rose by 2.1% year-on-year in the second quarter. Preliminary figures said 2.4%. The US Federal Reserve wants to contain the inflation rate, which remains high at 3.2% recently, without stopping the economy. He also tightened monetary policy in July and raised the key interest rate to a range of 5.25 to 5.50%. How things will continue in September is still unclear. The Fed wants to be guided by incoming data when making decisions.
The measure of inflation that monetary authorities closely monitor is consumers’ personal spending. This does not include volatile food and energy costs. The so-called core personal consumption expenditures index rose to an annual inflation rate of 4.2% in July, after 4.1% in June. Experts had expected this increase.