U.S. consumer spending increased more than expected in July, boosting expectations for a sharp rebound in economic growth in the third quarter, though momentum is likely to ebb as the COVID-19 pandemic lingers and money from the government runs out.
The report from the Commerce Department on Friday also showed a rise in personal income after two straight monthly declines, but a chunk of the increase was from unemployment benefits, which were bolstered by a weekly $600 supplement from the government that expired on July 31. Both consumer spending and income remain well below their pre-pandemic levels.
“The consumer is back spending at the shops and malls in July, but many of their purchases reflected pent-up demand following the pandemic lockdown,” said Chris Rupkey, chief economist at MUFG in New York. “The expenditures needed to fuel the economy’s recovery in August are a big question mark given the hit to personal income nationwide with the loss of those $600 weekly unemployment benefit checks.”