Consumer spending rises in June despite falling incomes, surging virus cases
Consumer spending rose 5.6 percent in June despite declining personal incomes, the Bureau of Economic Analysis reported Friday.
Personal consumption expenditures, which measures how much Americans spend on goods and services for their own use, rose by $737.7 billion in June as Americans continued to return to stores and businesses after months of coronavirus-driven lockdowns.
Consumer spending increased in June after a record 8.2 percent rise in May that followed record-breaking plunges in April and March. Even so, personal incomes decreased by $222.8 billion, a 1.1 percent decline, as the unprecedented fiscal stimulus measures enacted in March continued to wash out of the economy. Disposable income also declined by 1.4 percent in June.
Roughly 70 percent of U.S. gross domestic product (GDP) is driven by consumer spending, which fell off a cliff in March (negative 6.6 percent) and April (negative 12.6 percent) as the onset of the coronavirus pandemic forced millions of Americans out of work and into lockdowns.
Economists fear that the surge of coronavirus cases that began in the second half of June, driven in part by the swift reopening of businesses in some states without proper precautions, may dent consumer spending again. There are more than 4 million confirmed U.S. cases and 150,000 confirmed domestic deaths due to COVID-19, the disease caused by the novel coronavirus, according to Johns Hopkins University.
“During the lockdown when we got cases way down, you saw the economy reopening and you saw spending go up and hiring go up,” Federal Reserve Chairman Jerome Powell said during a Tuesday press conference. “Now that the cases have spiked again … the high frequency data suggest there’s a slowing pace of growth at least for now. We don’t know how deep or for how long it will be.”
The Trump administration and congressional leaders have spent weeks seeking a bipartisan deal on another stimulus package intended to help the U.S. economy recovery from the deep damage of the coronavirus recession. Those talks have yielded little progress, and the failure to strike a deal has allowed enhanced unemployment benefits and a federal foreclosure and eviction moratorium to expire without replacement.
–Updated at 8:56 a.m.