US consumer spending increased sharply in July when the household bought a selection of goods and services, which eases up the threats of the market recession. However, the numbers are not likely to be maintained because of slowing rates.
The economy was slowing down according to data shown by the Commerce Department report of July trade and industry data. For now, it was not losing some target levels, but there are dangers. The happenings can potentially spell out the longest economic expansion in history as affected by the yearlong trade feud between the US and China.
The global economic giants brought about unexpected fluctuations in the financial markets and caused an inversion of the yield curve of the United States. This event sparked the fear that even though it has been eleven years since the arrival of a recession, there are risks that it could happen again in the next few periods.
According to Lydia Boussour, a senior US economist at Oxford Economics in New York, “Even with elevated policy uncertainty and financial market issues, the U.S. consumer continues to display great potential, supported by a large buffer of savings.”
Consumer spending comprises two-thirds of the economic activity of the United States showed a significant increase in the last month. There was a 0.6% gain—a vital improvement compared to June’s 0.3%, told the government.
The active labor market drives the consumer spending ability of US citizens, and this might be affected by unemployment rates and job security among individuals. The latest data showed a price higher than the forecasted 0.5% for consumer spending last month.
Due to December and September tariffs slapped on Chinese manufactured goods, there are expected effects on consumer spending in the next few months.
Since December 2012, the University of Michigan posited, the consumer sentiment among US citizens showed the lowest record in August surveys, risen due to trade war tensions.
The conference board revealed that their survey showed a mild drop on consumer sentiment for August. University of Michigan results focused more on the stock market, which plays a substantial role in the economy.
A JP Morgan economist in New York, Daniel Silver emphasized the connection between consumer sentiment and consumer spending, which he describes as “not especially tight.”
“The recent decline in consumer sentiment could be a sign that a spending data will soften soon,” Silver added in an interview.
The second quarter showed a substantial effect of the trade war in the manufacturing and business investment of the United States. Consistently low domestic inflation and slowing global growth are likely to prompt Federal Reserve to cut interest rates anew next month.