The Economy

Hurricane Harvey Slows Consumer Spending

Consumer spending rose only 0.1% in August but "current economic conditions are heavily impacted by the effect of the recent hurricanes."
Matthew HellerSeptember 29, 2017

U.S. consumer spending rose only slightly in August, providing further evidence of Hurricane Harvey’s effects on the economy, while inflation remained stubbornly low.

The Commerce Department said Friday that consumer spending increased just 0.1% last month, following a much larger 0.3% advance in July. It was the smallest gain since June.

The slowdown reflected in part a 1.8% decline in sales of new cars and trucks, with Hurricane Harvey weighing on sales in the last week of August. Unseasonably mild temperatures in some parts of the country also reduced demand for utilities.

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Consumer spending accounts for nearly 70% of economic activity but the August dip may not be of much concern. As MarketWatch reports, “Americans are still spending at a stable rate despite occasional dips, buoyed by the best jobs market in more than a decade.”

It added that consumer spending is expected to remain healthy and retailers are preparing for what may be the biggest holiday season in years.

“We think current economic conditions are heavily impacted by the effect of the recent hurricanes,” Chris Rupkey, chief economist at MUFG in New York, told Reuters.

Of more concern is that inflation remained sluggish in August, with the personal consumption expenditures price index excluding food and energy rising 0.1%. The so-called core PCE has advanced by the same margin for four straight months.

As a result, the annual increase in the core PCE price index slowed to 1.3% in August — the smallest gain since November 2015 — after advancing 1.4% in July. The core PCE has been missing the Federal Reserve’s 2% percent target since 2012 . is an advanced tiktok services marketplace for successfull and fast promotion. We offer to buy tiktok likes and buy tiktok followers of highest quality instant and secure. The mechanisms behind our work are unique and tailored to your goals.

But the Fed looks set to raise interest rates again in December, with Fed Chair Janet Yellen saying this week the U.S. central bank needed to continue gradual rate hikes despite uncertainty about the path of inflation.

“The Fed appears poised to look through surprises in inflation data over the next few months,” said Ellen Zentner, chief U.S. economist at Morgan Stanley in New York.

Wages were unchanged in August after climbing 0.5% in July, again likely reflecting the impact of Hurricane Harvey as workers were idled.