Consumer spending in the United States surged in July, according to new data released Friday, suggesting American households are playing a crucial role in ensuring economic expansion continues.
A report from the Commerce Department found consumer spending increased 0.6% in July, following a 0.3% gain in June. Incomes, however, jumped 0.1% in July from June, the smallest gain in close to a year.
The increase in spending by American households, which accounts for roughly 70% of economic growth, could ease concerns the U.S. is headed for the recession. The bond market flashed a warning sign of a potential recession this month, and the protracted trade war between the U.S. and China has led to volatility in the markets.
Revised data from the Commerce Department released Thursday showed the U.S. economy grew at a 2.0% annualized rate in the second quarter, a downward revision from the preliminary estimate of 2.1% growth. The figures indicated the U.S. economy is decelerating, though President Trump has rebuffed suggestions the country could be headed for an economic downturn and accused the Federal Reserve of holding back economic growth.
The continuing trade dispute with China escalated last week after Beijing slapped tariffs on $75 billion worth of U.S. goods, a move that prompted Trump to hike existing tariffs on $250 billion in Chinese imports, as well as on duties on $300 billion in goods shipped from China set to take effect Sept. 1 and Dec. 15.
Tensions seemed to cool, though, as the president said officials from Washington and Beijing would return to the negotiating table to discuss a trade deal.
Still, the ongoing trade war has led businesses to reconsider investments and warn that they may have to pass on the cost of the levies to U.S. consumers. The U.S. manufacturing sector also contracted in August for the first time in nearly a decade, another indicator of the effect of the trade tensions between the U.S. and China.
