Business

US consumers spend more and save less in July

Shoppers in New York
Image caption Consumers spent more even though their incomes grew less quickly

US consumer spending rose by a faster-than-expected 0.4% in July, as shoppers saved less of what they earned.

Personal income, however, grew only 0.2%. Economists had expected both numbers to rise by 0.3%.

Meanwhile, a regional manufacturing survey for Texas showed zero growth in August, confirming a nationwide slowdown in industrial output.

Wall Street was underwhelmed by the data, with the Dow Jones dropping some 0.7% by lunchtime.

Saving versus spending

The growth in consumer spending was the fastest since March, though total spending still remains well below its pre-recession highs.

However, the fact that personal income grew more slowly means that the savings rate in the US - the percentage of income that households choose not to spend - fell slightly, to 5.9% from 6.2% in June.

Before the global recession, the US savings rate was close to zero, meaning that households spent nearly all they earned.

It rose during the recession, however, resulting in a big fall in consumer spending.

Many economists expect the savings rate to remain at 6% or rise even further. Historically, the savings rate has been even higher - at 8%-12%.

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