Tired of ads? Subscribers enjoy a distraction-free reading experience.
Click here to subscribe today or Login.

But economists’ outlook for year indicates unemployment, falling wages to weigh down economy.

Customers pay for purchases at the new JC Penney in the Manhattan Mall in New York. Consumers opened their wallets a bit more in June.

AP PHOTO

WASHINGTON — As gasoline prices rose, Americans spent more in June than the previous month — despite falling incomes. For the rest of the year, economists expect falling wages and rising unemployment to act as a drag on spending.
Consumer spending is closely watched because it accounts for about 70 percent of total economic activity and has helped lift the economy out of previous recessions. While analysts expect the economy to grow in the second half of this year, consumers aren’t likely to lead the way.
Americans boosted their spending 0.4 percent in June, the Commerce Department said Tuesday, the second consecutive monthly increase. But adjusting for inflation, spending fell 0.1 percent, following a flat reading in May. Inflation-adjusted spending hasn’t increased since February, the department said.
Personal income, meanwhile, dropped 1.3 percent in June, the eighth straight decline. Incomes were inflated in May due to one-time payments from the Obama administration’s stimulus program. But wages and salaries also fell 0.4 percent in June.
“The key message is that … income remains weak” and consumers are likely to keep saving more, according to Paul Dales, U.S. economist at Capital Economics. “Under those circumstances, we expect spending to remain muted for some time.”
Consumer spending may increase in July and August due to the government’s “cash-for-clunkers” program, economists said, but will likely level off afterward. The program has spurred thousands of Americans to trade in old cars for newer vehicles.
Gas prices peaked June 22 after rising nearly every day for two months. A price index included in the income and spending report showed overall prices rose 0.5 percent in June, but were up only 0.2 percent when food and energy are excluded.