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| Slowdown in US consumer spending | |
| (30 minutes later) | |
| US spending rose by just 0.2% in July, as the effects of a government stimulus package designed to boost slowing economic growth wore off. | |
| Consumer spending - which accounts for two-thirds of the US economy - had risen by 0.6% in June. | |
| Personal income fell 0.7% in July, the sharpest fall since a 2.3% drop in August 2005 after Hurricane Katrina. | Personal income fell 0.7% in July, the sharpest fall since a 2.3% drop in August 2005 after Hurricane Katrina. |
| Friday's data provides further evidence of a slowing economy, despite earlier reports of strong US growth. | Friday's data provides further evidence of a slowing economy, despite earlier reports of strong US growth. |
| The US economy grew at a revised 3.3% annual rate in the second quarter of 2008, the Commerce Department said on Thursday, much higher than its first estimate of 1.9%. | |
| Consumers, fearful of losing their jobs, are spending less | |
| The rebound was linked to strong US exports, helped by the weak dollar, while government tax rebates also boosted consumer spending. | The rebound was linked to strong US exports, helped by the weak dollar, while government tax rebates also boosted consumer spending. |
| However, analysts said the consumer spending data indicated that the US economy was not out of the woods yet. | |
| "There is not much that the market did not know here, but it is a reminder that the third quarter and particularly the fourth quarter will look a good deal worse than the second," said Alan Ruskin, chief international strategist at RBS Greenwich Capital. | |
| Rising prices | |
| If the impact of rising prices is factored in, spending actually fell by 0.4% in July, the weakest showing for inflation-adjusted spending in more than four years. | |
| Inflation, as measured by the rise in personal consumptions index, rose 4.5%, the sharpest rise since February 1991, the government said. | |
| The mix of rising prices and faltering growth presents policymakers with a dilemma, making them reluctant to raise rates to combat inflation, in case the economy slows further. | |
| Democrats want President Bush to deliver a second stimulus package, to boost spending and prevent a recession. | |
| Analysts say the impact of the rebates is substantial. "The effects of the tax rebates rolling on and off are relatively large," said Steven Wieting, senior economist at Citigroup. |