U.S. reports solid July consumer spending; core inflation firmer

U.S. consumer spending increased solidly in July while underlying inflation picked up as tariffs on imports raised prices of some goods, but that data will probably not prevent the Federal Reserve from cutting interest rates next month against the backdrop of softening labor market conditions.

Consumer spending, which accounts for more than two-thirds of economic activity, rose 0.5 per cent last month after an upwardly revised 0.4 per cent gain in June, the Commerce Department said on Friday. Economists polled by Reuters had forecast spending would rise 0.5 per cent after a previously reported 0.3 per cent advance in June.

Consumption is being supported by low layoffs that are underpinning solid wage growth. But President Donald Trump’s sweeping tariffs on imports are raising costs for b