MercoPress. South Atlantic News Agency

US consumers cut spending in June for the first time in two years

With incomes growing at a slower pace, consumers are becoming more conservative

US consumer spending unexpectedly fell in June to post the first decline in nearly two years as incomes barely increased, a government report showed, suggesting economic growth could remain subdued in the third quarter.

The Commerce Department said consumer spending slipped 0.2%, the first drop since September 2009, after edging up 0.1% in May.

When adjusted for inflation, spending was flat in June after easing 0.1% the prior month. The decline came even as gasoline prices retreated from their peak just above 4 dollars a gallon in early May and suggested the much-anticipated bounce back growth in the third quarter would lack vigour.

Consumer spending barely grew in the second quarter, inching up at an annual rate of only 0.1%, the weakest pace since the end of the 2007-09 recession. Spending increased at a 2.1% rate in the first quarter.

That contributed to hold the economy to an anaemic growth pace of 1.3% in the second quarter.

The weak spending in June also reflected tepid income growth after employment growth ground to a near halt in June, with non-farm payrolls rising only 18,000. Income ticked up 0.1%, the smallest increase since November, after rising 0.2% in May.

Disposable income ticked up 0.1%, also the smallest increase since November. But when adjusted for inflation, disposable income rose 0.3%. With real disposable income outpacing spending, savings rose to 620.6 billion from 581.7 billion dollars in May.