American consumers increased their spending by 1% in June, a dose of energy for an economy that is quickly rebounding from the pandemic recession. At the same time, a key inflation barometer closely followed by the Federal Reserve surged 4% last month.
At the same time, a key inflation barometer that is closely followed by the Federal Reserve surged 3.5% last month from a year earlier. That was the fastest such 12-month surge since 1991.
In its report Friday on consumer spending in June, the government said that goods purchases rose a modest 0.5%, while spending on services increased a stronger 1.2%. As vaccinations have increased and the economy has increasingly reopened, more Americans have been shifting their spending away from the physical goods that many purchased while hunkered down at home to to spending on services, from haircuts to airline tickets to restaurant meals.
Yet the economy’s prospects are now clouded by the possibility of a resurgent coronavirus in the form of the highly contagious delta variant. The U.S. is now averaging about 67,000 confirmed new cases a day, up from only about 12,000 a month ago. Should a surge in viral infections cause many consumers to retreat back to their homes and pull back on spending, it would weaken the recovery.The inflation index that showed a 3.
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