After a surprise drop in May, U.S. consumers stepped up their spending in June, delivering a sorely needed jolt to the economy. Both consumer spending increased by 0.3% month-over-month. This surge is happening against the backdrop of skyrocketing inflation, including massive increases in costs for energy and consumer goods.
In May, consumer spending came to a standstill, showing no increase whatsoever. Analysts were looking for a slight uptick in June. That prediction turned out to be right, as the most recent data shows that consumer spending fueled economic growth. This rise occurred in tandem with the tariff-driven jumps in consumer prices at grocery stores and ecommerce companies like Amazon. In this context, there is increasing alarm about the impact of inflation on families.
This marked an increase of 0.9% for energy prices, up from the 1% decrease recorded in May. This spike was a primary driver of headline inflation’s sharp upward trend. To do so, goods prices hiked up 0.4%, the largest month-to-month cycle since January. These changes are another nod to the long term crisis consumers have been facing in the wake of both high costs and an ever-changing economy.
The money markets welcomed the news of increased consumer spending. Futures tied to the S&P 500 jumped by 0.92% as of 8:39 a.m. ET, while Nasdaq 100 futures surged 1.33%. Moreover, Dow futures rose 100 points, or 0.23%, indicating investor bullishness on the back of hawkish inflation fears.
Consumer spending is booming, a testament to the economy’s strength. This interplay is not as straightforward as it seems. This overall increase exposes the delicate equilibrium between expansion and inflation. Analysts continue to monitor these trends closely as they assess the broader implications for economic stability and consumer confidence moving forward.