U.S. households boosted spending by 1% in June as consumers shelled out more on services at the start of the summer, but a current upswing in Covid-19 cases related to the Delta variant is injecting uncertainty into the economic outlook.
Personal-consumption expenditures—a measure of household spending on goods and services—increased last month, the Commerce Department reported Friday, beating economists’ expectations for a 0.7% rise. That followed a downwardly revised 0.1% drop in May, when consumers pulled back on purchases of goods but boosted spending on services.
Friday’s report also showed Americans’ personal income rose 0.1% in June. Still, rising inflation and the latest surge in virus cases could affect future spending trends.
Inflation has accelerated this year as the economy faces supply-chain bottlenecks and materials shortages. Friday’s report showed that the core personal-consumption expenditures price index—a measure of inflation that excludes often-volatile prices for food and energy—was up 3.5% in June from a year ago, compared with a 3.4% yearly increase in May.
Americans have been doling out money to resume activities outside the home since state and local governments eliminated Covid-19 restrictions earlier this year, a trend that has particularly benefited service-sector industries, such as restaurants and travel. They had been battered earlier in the pandemic as Americans stayed indoors and shifted spending toward household items and other goods.