US Consumer Spending Remains Robust in July Amid Stable Inflation and Rising Incomes
US consumer spending surged in July, demonstrating resilience and consistent activity despite elevated inflation and tariffs. The PCE index remained stable, indicating strong demand and potential economic growth, supported by rising incomes.
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Overview
- US consumer spending surged by 0.5% in July, driven by purchases of motor vehicles, financial services, and housing, indicating strong willingness to spend.
- This robust consumer activity occurred despite elevated inflation and President Trump's tariffs, showcasing consumers' resilience and sustained demand in the economy.
- The Personal Consumption Expenditures (PCE) index, a key measure of consumer spending, showed stability in July, reflecting consistent economic activity across the United States.
- While overall inflation held steady at 2.6% year-over-year, core inflation, excluding food and energy, increased to 2.9%, marking its highest level since February.
- Incomes also rose by 0.4% from June to July, primarily due to a strong increase in wages and salaries, supporting consumers' ability to maintain consumption levels.
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Analysis
Center-leaning sources frame this story by highlighting the persistent challenge of inflation, despite some cooling, through the lens of the Federal Reserve's cautious approach. They emphasize the "hot under the surface" aspects of core inflation and robust consumer spending, suggesting a complex economic picture that justifies the Fed's reluctance to cut rates amidst political pressure.
"While inflation is much lower than the roughly 7% peak it reached three years ago, it is still running noticeably above the Fed’s 2% target."
Fortune"The figures illustrate why many Fed officials have been wary about cutting their benchmark interest rate."
CBS News"Prices rose 2.6% in July compared with a year ago, the Commerce Department said Friday, the same annual increase as in June."
Associated PressArticles (7)
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FAQ
The surge in July 2025 consumer spending was driven by higher purchases of motor vehicles, financial services, and housing, reflecting strong willingness to spend despite inflation and tariffs.
Overall inflation held steady at 2.6% year-over-year, while core inflation rose to 2.9%, the highest since February, yet consumer spending remained robust, indicating resilience despite inflation pressures.
Incomes increased by 0.4% from June to July, mainly due to stronger wages and salaries, supporting consumers' ability to maintain or increase their spending levels.
Despite President Trump's tariffs and associated elevated economic uncertainty, consumers continued to spend strongly, demonstrating resilience and sustained demand in the economy.
Monthly trends up to July 2025 show no significant slowdown in consumer spending, supported by robust job growth and relatively subdued inflation, though some inflation pressures on goods might affect future real spending growth.
History
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