WASHINGTON — Americans spent more money than they earned in July — largely on auto purchases — as the personal savings rate fell last month.
Personal income rose 0.3 percent in July, but spending climbed an even faster 0.8 percent, the Commerce Department said Monday. The rise in spending matched the increase in February as the largest since summer 2009.
Adjusted for inflation, personal spending rose 0.5 percent last month, compared with a less than 0.1 percent decline in June.
“Purchases of motor vehicles and parts accounted for most of the increase in July and for most of the decrease in June,” the Commerce Department said in its release.
Because spending rose more than income, the individual savings rate in July dropped to 5.0 percent of disposable income from 5.5 percent.
Adjusted for inflation, disposable income actually fell 0.1 percent to mark the first drop in 10 months. Disposable income, or take-home pay after taxes, fell mainly because of higher gas and food costs.
“Consumers had to save less in order to buy automobiles, turn on their air conditioners, and keep up with higher grocery and gasoline bills,” said Chris Christopher, senior economist at IHS Global Insight.
The level of prices rose 0.4 percent based on the latest reading from the personal consumption expenditure price index.
The core PCE, which excludes volatile food and energy costs, rose a lesser 0.2 percent. The core index is closely watched by central bankers and economists to gauge inflationary trends.
Economists surveyed by MarketWatch had forecast a 0.4 percent increase in personal income and a 0.6 percent rise in consumer spending. The core PCE index was expected to rise 0.2 percent.
