Correction to U.S. Consumer Spending Article

Americans’ spending and incomes grew healthily in July, but weak inflation continued to cloud the economic outlook.

Personal spending–measuring what Americans spent on everything from haircuts to cars–rose 0.3% in July from a month earlier, the Commerce Department said Thursday. That was the strongest pickup since April.

Personal income–reflecting Americans’ wages and investment earnings–grew 0.4%, the biggest jump since February.

Economists surveyed by The Wall Street Journal expected a 0.4% gain in spending and a 0.3% rise in income.

Consumer spending accounts for the bulk of economic output in the U.S., and the latest pickup suggests the economy carried momentum into the year’s second half. Output grew at a 3% annual pace in the second quarter, the government reported earlier this week, and Thursday’s report pointed to similar or greater growth in the current period. The boost in incomes gives Americans more money to spend and could increase their confidence.

But the report also showed weak inflation pressures, complicating the Federal Reserve’s plan to lift short-term interest rates before year-end. The price index for personal consumption expenditures–the Fed’s preferred inflation gauge–grew 0.1% in July. That marked slight progress after a flat reading in June and a 0.1% drop in May. But the annual rate held steady at 1.4%, down from 2.2% earlier this year and below the Fed’s 2% annual target.

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Core prices, which exclude energy and food costs, increased 0.1% from a month earlier. The annual rate of core price growth fell a tenth of a percentage point to 1.4%, the lowest level since December 2015.

Fed officials have attributed the weaknening in inflation largely to temporary factors and they say they believe inflation will gradually pick up to its 2% target. But the weakness could give Fed officials pause as the weigh a further interest rate increase.

Meanwhile, Thursday’s report showed that the boost in consumer spending was due partly to Americans reducing the share of income they save. The savings rate dipped a tenth of a point to 3.5% last month. The rate was as high as 6.3% in late 2015.

The Commerce Department report on personal income and spending can be accessed at

Write to Josh Mitchell at and Sarah Chaney at

Corrections & Amplifications

This item was corrected at 8:42 a.m. ET to show that the report was released Thursday, not Friday.

“U.S. Consumer Spending Climbed Steadily in July,” at 8:45 a.m. ET, misstated the day of the report in the ninth paragraph. The report was released Thursday, not Friday.

(END) Dow Jones Newswires

August 31, 2017 08:56 ET (12:56 GMT)

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