Growth in U.S. consumer spending slowed in July to a modest increase of 0.3% while inflation over the past 12 months rose to the fastest pace in three decades.
FILE - In this July 14, 2021 file photo, pedestrians pass the Macy's store in the Downtown Crossing shopping area, in Boston. Americans cut back on their spending last month as a surge in COVID-19 cases kept people away from stores. Retail sales fell a seasonal adjusted 1.1% in July from the month before, the U.S. Commerce Department said Tuesday, Aug. 17.
Consumer prices over the past 12 months have risen 4.2%, the biggest 12-month gain since a 4.5% increase for the 12 months ending in January 1991. This price index tied to consumer spending is the inflation gauge preferred by the Federal Reserve. “The spike in inflation is so far largely the product of a relatively narrow group of goods and services that have been directly affected by the pandemic and the reopening of the economy,” Powell said, effects that “should wash out over time.”
The government reported Thursday that the overall economy as measured by the gross domestic product, rose by a solid 6.6% in the April-June quarter. While economists have trimmed their forecasts for growth in the current quarter based on the virus resurgence, analysts still believe if COVID-19 cases recede in the final four months of 2021, the country will experience its strongest growth since the mid-1980s this year.
Southwest Airlines is reducing flights for the rest of the year because infection rates in the U.S. are starting to cut into demand for plane tickets.
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