Americans felt more confident about economic growth prospects in July, as evidenced by a Commerce Department report that showed a 0.3% increase in consumer spending, according to economists.
Consumer spending accounts for 70% of the U.S. economy, which is why any increase represents a positive outlook for future economic growth. The increase also represented the biggest growth in the last three months, following a 0.2% rise in May and June.
Consumer spending may have grown in July, yet it was less than the expected 0.4% increase by economists. If not for stagnant inflation, the Federal Reserve may have worked on raising interest rates in December 2017.
Despite the U.S. employment sector almost reaching its peak, inflation has advanced at its slowest pace in more than a year.
On the bright side, experts expect the Federal Reserve to be careful in increasing rates for the third time this year, given the current situation, according to Chris Rupkey, chief economist at MUFG in New York.
Despite the slow pace of inflation growth, the report noted that U.S. gross domestic product climbed 3.0% between April and June at an annual rate, which was the fastest growth in more than two years.
Businesses, whether online or offline, should consider providing more options for consumer financing to attract and retain clients, amid strong growth in purchases. Spending for durable goods, for instance, rose 0.6% that includes automobiles.
Non-durable goods such as food items and clothing increased 0.5% in July, while services such utilities and medical visits grew by 0.2 %. For the third quarter of 2017, Rupkey expects consumer spending to continue supporting the overall U.S. economy with an estimated 2.8% for the three-month period.
The report on higher consumer spending should serve as encouraging news for several industries. A higher level of expenditure not only benefits the economy but also ensures that businesses remain buoyant in the future.