US Consumer Spending Losing Momentum, But The Fed Is In No Hurry To Act
US personal consumption expenditure (PCE) stagnated in June, after rising by +0.1% mom in May and compared with -0.1% in April. This suggests that consumers have turned cautious in spending, as job market remains weak and austerity drive in Europe coupled with policy normalisation and tightening in emerging economies will likely slow down the global economy. In real terms, PCE grew at a slower pace of 0.1% mom in June, compared with +0.2% in May. On an annualised basis, the PCE slowed down to 1.6% in June, from +2.3% in May and the peak of +2.5% in April, suggesting that consumer spending is losing momentum. The US uses this figure to compute its consumer spending in real GDP. As a result, the US economy slowed down to an annualised rate of 2.4% in the 2Q, from +3.7% in the 1Q. Despite the softening, we believe PCE will unlikely fall off the cliff and will continue providing a support to the US economy, given that employment in the private sector is improving, albeit gradually.
Tracking The World Economy... - 04/08/2010
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