Consumer spending in the U.S. climbed in July for the first time in three months as the biggest part of the economy struggled to overcome a jobless rate hovering over 8 percent.
Purchases increased 0.4 percent after being little changed in June, Commerce Department figures showed today in Washington. The median estimate of 76 economists surveyed by Bloomberg called for a 0.5 percent gain in so-called nominal sales. Incomes climbed 0.3 percent for a third month.
Consumers bounced back last month after scrimping in June and May, which may set the stage for faster third-quarter economic growth. Even so, costlier gasoline and a jobless rate that has exceeded 8 percent since early 2009 threaten to limit spending gains in the second half of 2012.
“The quarter is getting off to a decent start,” said Gus Faucher, a senior economist at PNC Financial Services Group Inc. in Pittsburgh, who correctly forecast the increases in purchases and income. “The consumer’s situation is slowly improving, but the job growth isn’t there to support really big gains in future spending.”
Projections for spending ranged from increases of 0.2 percent to 0.7 percent.
Another report showed more Americans than forecast filed applications for unemployment benefits last week, a sign that progress in the labor market is faltering amid a plodding economic recovery.
Jobless claims were little changed at 374,000 in the week ended Aug. 25, matching the upwardly revised figure from the prior week, the Labor Department reported today in Washington. The median forecast of 50 economists surveyed by Bloomberg News called for 370,000. The four-week moving average, a less volatile measure, climbed to a six-week high.
Stocks declined as report from Europe, Japan and South Korea fueled concern the global economy is slowing. The Standard & Poor’s 500 Index fell 0.6 percent to 1,402.24 at 10:35 a.m. in New York.
Incomes were revised down for June from a previously reported 0.5 percent gain, today’s spending report showed. The July increase matched the 0.3 percent median estimate of economists surveyed.
Because spending rose more than incomes, the saving rate fell to 4.2 percent from 4.3 percent in June, the highest level in a year.
The spending figures used to calculate gross domestic product, which remove the effects of inflation, showed purchases climbed 0.4 percent in July. They dropped 0.1 percent in June and fell less than 0.1 percent in May.
The gains in demand last month may have extended into August. Gap Inc. and Macy’s Inc. posted same-store sales this month that topped analysts’ estimates as consumers took advantage of back-to-school promotions, data today showed.
Sales at Gap, the biggest U.S. specialty-apparel retailer, climbed 9 percent, beating the average projection for a 5.5 percent gain from analysts surveyed by researcher Retail Metrics Inc. Macy’s, the department-store chain, posted a 5.1 increase in same-store sales, topping the 3.3 percent estimate.
Same-store sales for the more than 20 companies tracked by Swampscott, Massachusetts-based Retail Metrics were estimated to rise 1.8 percent, following a 4.4 percent increase in July, the firm said in a report yesterday. Full results will be available later today.
“The back-to-school business has been really quite good,” Ed Stack, chairman and chief executive officer of Dick’s Sporting Goods Inc., said during an Aug. 14 earnings call. The Coraopolis, Pennsylvania-based retailer this month boosted its forecast for full-year earnings. “We’ve been very pleased with our business,” he said.
A jump in employment growth shored up household purchasing power last month. Payrolls rose by 163,000 workers in July, the most since February, according to Labor Department data. At the same time, the jobless rate rose to 8.3 percent, the highest level in five months.
Sustained consumer demand would boost the pace of economic expansion in the U.S. Americans’ purchases increased at a 1.7 percent annual rate in the second quarter, the smallest advance in a year. The world’s largest economy expanded at a revised 1.7 percent annual rate in the second quarter as well.
Consumer spending will increase at a 2 percent rate in the third quarter, according to the median forecast of 78 economists surveyed BY Bloomberg from Aug. 3 to Aug. 8.
Faster growth driven by household spending will probably hinge on bigger job gains. Measures of sentiment, nonetheless, indicate employment prospects are not picking up. The Conference Board’s index of consumer confidence fell in August by the most in 10 months, and the Bloomberg Consumer Comfort Index dropped in the week ended Aug. 19 to the lowest level since January.
Gasoline prices present an additional obstacle. The average price of a gallon of regular gasoline climbed 28 cents since July 30 to reach $3.80 on Aug. 28, according to AAA, the nation’s largest auto club. Prices at the pump will be the highest ever for the U.S. Labor Day holiday, AAA forecast.
A measure of prices tied to consumer spending advanced 1.3 percent in the 12 months ended July, the smallest gain since October 2009. The Federal Reserve’s long-run goal is 2 percent. Excluding food and energy costs, the price gauge increased 1.6 percent in the past year.
Fed Chairman Bernanke may use a speech tomorrow in Jackson Hole, Wyoming, to discuss the central bank’s assessment of the expansion. Policy makers have said they are prepared to provide new stimulus “fairly soon” unless they’re convinced the economy is poised to rebound, according to the minutes of the Federal Open Market Committee’s July 31-Aug. 1 meeting released last week.