US consumer spending and income growth both weak in June

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The slowdown in income growth reflected declines in dividend and interest payments and other investment income. The key category of wages and salaries actually rose a solid 0.4 per cent in June, reflecting strong employment growth during the month.

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An inflation gauge tied to consumer spending that is closely followed by the Federal Reserve was up 1.4 per cent for the 12 months ending in June, compared to a 1.5 per cent increase in May. It was the smallest 12-month gain since last September and showed that inflation is continuing to fall farther from the Fed’s target for prices to be rising by 2 per cent annually.

The central bank left its key interest rate unchanged at a meeting last week after boosting the rate in March and June. Some economists believe the Fed will not raise the rate again this year unless inflation resumes rising toward the Fed’s 2 per cent target.

Many economists believe the slowdown in inflation will keep the Fed on hold at its next meeting in September. But Hunter said he still expected one more rate hike in 2017, probably in December, prompted by further declines in the unemployment rate, which already stands at a low 4.4 per cent.

With incomes flat and spending showing a tiny gain, saving slipped to 3.8 per cent of after-tax income, down from 3.9 per cent in May.

The 2.6 per cent in overall growth, as measured by the gross domestic product, in the second quarter was more than double the lacklustre 1.2 per cent gain in the first quarter.

President Donald Trump has vowed that his economic program of tax cuts, deregulation and tougher trade enforcement will lift growth to 3 per cent or better. At a Cabinet meeting Monday, Trump took note of the 2.6 per cent GDP gain in the second quarter, calling it “an unbelievable number.” He said, “2.6 is a number that nobody thought they’d see for a long period of time.”

Martin Crutsinger, The Associated Press