By David Harrison and Josh Mitchell
WASHINGTON--Americans curbed their spending increases in June, a
sign that weak wage growth might be weighing on consumers.
Personal spending, which measures what consumers spend on
everything from donuts to dishwashers, rose 0.2% from a month
earlier, the smallest gain since February, the Commerce Department
said Monday. In May, spending rose a revised 0.7%.
Personal income, which includes wages and government aid,
climbed 0.4% in June after rising a revised 0.4% in May.
Economists surveyed by The Wall Street Journal had expected a
0.2% increase in consumer spending and a 0.4% increase in personal
income.
The increase comes after the Commerce Department reported last
week that inflation-adjusted consumer consumption rose at an
annualized rate of 2.9% in the second quarter, contributing to a
bounceback in gross domestic product following a disappointing
winter.
But wage growth slowed unexpectedly in the second quarter, which
could have dampened Americans' enthusiasm to spend.
Meanwhile, consumer prices rose slightly in June. Prices rose
0.2% over May, as measured by the personal consumption expenditures
price index, the Federal Reserve's preferred inflation gauge.
Prices were up 0.3% from a year earlier. Inflation has now run
below the Fed's 2% target for more than three years.
Excluding the volatile food and energy categories, core prices
climbed 0.1% from May and 1.3% from a year earlier.
Lower oil prices and a strong dollar have kept inflation in
check in recent months. The trend has been toward slower inflation,
with the 12-month inflation rate lower than it was in May 2014,
when it hit 1.8%.
Fed officials are paying especially close attention to the labor
market and to inflation as they consider raising short-term
interest rates from near zero, where they have stayed since 2008.
Fed officials have said they want to be "reasonably confident" that
inflation is moving back towards the 2% level before they raise
rates. Monday's inflation reading could be cause for concern about
a rate increase in the near term.
Fed officials think the slowdown will be temporary. Speaking to
lawmakers last month, Fed Chairwoman Janet Yellen said she expects
inflation to pick up "over the medium term" as oil prices
stabilize.
Ms. Yellen also said she expects lower oil prices and a robust
job market to eventually lead to greater consumer spending growth,
a critical component of overall gross domestic product.
The Commerce Department report on personal income and spending
can be accessed at http://www.bea.gov/newsreleases/rels.htm.