In July, consumer spending in the U.S. exceeded expectations, increasing by 0.8%. This was mainly due to spending on goods and services. The economy is benefitting from this as well as from the tight labor market and slowing inflation.
The PCE price index, which measures inflation, increased by 0.2% in July. The annual PCE inflation rate also rose to 3.3%. However, the core PCE price index only grew by 4.2% year-on-year. This is raising optimism that interest rates will not be raised by the Federal Reserve.
Despite rising interest rates, U.S. companies seem to be holding on to their employees as applications for unemployment benefits have slightly decreased. The job market remains strong with initial claims falling to 228,000 and the unemployment rate at a 50-year low of 3.5%.