U.S. consumer spending rose sharply for a second straight month in June though economists fear the recovery may be dampened as Americans face a surge in coronavirus infections and the loss of additional unemployment benefits.

The Commerce Department said Friday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew 5.6% last month after a record 8.5% jump in May.

The June gain reflected increased spending on new cars and trucks, clothing, gasoline and recreation as the economy largely reopened last month. Economists polled by Reuters had forecast consumer spending would advance 5.5% in June.

“With June’s increase, inflation-adjusted consumer spending has pulled out of April’s deep hole, though it remains below its pre-pandemic level,” CNBC said.

“But the explosion of COVID-19 infections, especially in the densely populated South and West regions where authorities in hard-hit areas are closing businesses again and pausing re-openings, is casting doubt on the magnitude of the expected surge in third-quarter consumer spending,” CNBC added.

The spending report came a day after the government reported a record 32.9% drop in GDP for the second quarter. According to The Wall Street Journal, “fresher evidence shows households recently pulled back [on spending] as coronavirus infections rose.”

In particular, credit- and debit-card transactions were flat in July after rising in May and June, according to a JPMorgan Chase & Co. tracker, and spending at restaurants also stalled.

“The more COVID cases there are, the more fear there is from consumers and that impacts their spending in a negative way,” said Lara Koslow, managing director and senior partner at Boston Consulting Group.

Additionally, the $600 a week in additional unemployment benefit, which had helped prop up household income during the pandemic, expired this week. Personal income dropped 1.1% last month but was still 4% higher than in February, the month before the pandemic shut down swaths of the economy.

In April, consumer spending plunged a record 13.6%. Spending in June was boosted by a 6.4% rise in purchases of goods while outlays on services increased 5.2%.

Alexi Rosenfeld/Getty Images

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