WASHINGTON — Consumer spending stagnated in June as labor-market weakness prompted Americans to use the biggest gain in incomes in three months to build savings.
Household purchases, which make up 70 percent of the economy, were unchanged last month after a 0.1 percent decline in May, a Commerce Department report showed Tuesday in Washington. The median estimate in a Bloomberg News survey of economists called for a 0.1 percent rise. Incomes climbed 0.5 percent, lifting the saving rate to 4.4 percent, the highest in a year.
Americans may be growing less pessimistic about job prospects later in the year, with another report Tuesday showing consumer confidence rose unexpectedly for the first time in five months. Federal Reserve policymakers meeting Tuesday and Wednesday may wait for more employment data before deciding whether action is needed to boost an economy that has slowed for two straight quarters.
“There’s been some backtracking in the labor market, so consumers are choosing to save the income rather than spend it,” said Julia Coronado, chief economist for North America at BNP Paribas in New York, who correctly projected the stagnation in purchases. “The third quarter will be pretty subdued.”
Other data in the U.S. showed that a gauge of business activity unexpectedly rose in July, and home prices declined less than forecast in the year ended in May.
Projections for personal spending among the 76 economists surveyed by Bloomberg ranged from a drop of 0.1 percent to a gain of 0.4 percent. The May reading was previously reported as unchanged.
The June results indicate the consumer was losing steam as the quarter drew to a close. Household spending rose 1.5 percent from April through June, the slowest pace in a year, according to government data last week. Gross domestic product also climbed at a 1.5 percent annual rate, cooling from a 2 percent pace in the prior three months.
