Washington, D.C. Consumer spending increased slightly in August compared to July, showing that the economy is still doing well despite inflation driving up the cost of food, rent, and other necessities.
According to data released on Friday by the Commerce Department, Americans increased their spending in stores and on services like haircuts by 0.4% in August after it decreased by 0.2% in July. However, a large portion of that growth was due to higher prices, with an inflation rate carefully watched by the Federal Reserve increasing by 0.3% in August, according to the government’s data.
The data suggests that, despite rapidly rising interest rates, erratic stock market fluctuations, and high inflation, the economy is displaying some resilience.
However, there were indications that consumers are being affected by increased prices. Consumer expenditure is expanding more slowly after accounting for inflation. In the period of April through June, it grew at a 2% annual rate. However, according to figures from July and August, spending growth is expected to fall in the July to September quarter to just 0.5% annually.
After contracting in the first six months of this year, the economy is predicted to expand in the third quarter. However, several analysts revised their predictions downward in the wake of the spending report, and they now anticipate growth to be only around 1% per year.
Along with spending less, Americans are saving less to keep up with rising costs. According to the study released on Friday, the U.S. saving rate in August was only 3.5%, a significant decline from the pre-pandemic high of 8%.