Consumer Spending In June Offset By Inflation
The Commerce Department released consumer spending data for June this morning. The 0.6% increase in consumer expenditures was more than offset by the 0.8% rise in consumer inflation.
While the economic stimulus checks have provided some relief, higher food and energy prices have definitely taken their toll. Energy prices flattened out somewhat back in April but rose sharply in May and June.
Excluding food and energy, consumer core inflation was at 0.3% which matched CPI numbers for June. The Federal Reserve is expected to keep interest rates at 2% when it meets tomorrow.
Despite the increased inflationary concerns, financial markets remain weak and the economy continues to shed jobs. Fed officials must be breathing a sigh of relief that oil prices have retreated somewhat, falling back down to the $120 level in the last couple of weeks.
A number of analysts were predicting that oil could reach $180 by the end of the year. Congress has been making rumblings for weeks about placing restrictions on institutional investors and speculative trading in general for commodity markets especially oil.
With two thirds of economic growth made up from consumer spending, the next few months could be sluggish. The federal government will probably need to institute additional fiscal policy initiatives to help spur the economy.
