With income outpacing expenditures, consumers may have "a good amount of cushion to sustain spending if or as the economy slows."
“The consumer is still very sturdy and providing fundamental strength to the overall economy,” an economist says.
The government's second estimate of GDP showed a rebound in corporate profits as businesses benefited from strong consumer spending.
Sales increased 0.7% in July, "a reassuring sign for a U.S. economy that’s facing mounting hurdles."
Consumers increased spending while exporters and manufacturers cut back.
Performance was driven by “a well-balanced mix of spending volumes, lending income, and card fees.”
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Deceleration in consumer spending is expected to curb the increase and keep interest rates unchanged.
“The economy is in a sweet spot for now," with inflation pressures remaining too weak for the Fed to raise interest rates.
GDP got a boost in Q1 from a sharp decline in imports but economists warn that underlying spending and investment data point to slowing growth.
The measure of consumer spending fell 0.2% after a 1.2% gain in January, signaling tepid economic growth for the first quarter.
The biggest drop in spending since 2009 confirmed expectations that the economy will slow down further in the first three months of 2019.
