Consumer spending increases more than earlier predictions

Consumer spending grew higher but wasstill lower than the savings, in July. The savings rate plunged to the lowest since March, to remain at 5.5 percent.

U.S. consumer spending rise more than the earlier forecasts in July. Following 0.1 percent fall in June, purchases climbed up by 0.8 percent to count the biggest hit since February. The Commerce Department statistics showed an increase in income rate by 0.3 percent, while the savings plunged to the lowest in the past quartet.

Standard & Poor’s 500 Index shows the demand to be temperate in the coming months.

The demand index recorded 17 percent plunk in the time between July 22 to August 8. Experts attributed lower demands to the federal budget crisis and said that all time low U.S. credit ratings have also hurt consumer confidence up to a certain extent.

Why consumer spending increased in July
The recent plunge in oil prices may have helped the consumers as the nation is still grappling with 9.1 percent unemployment rate.

Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York said, “It may be tough to repeat that strong a performance… the decline in gasoline prices is a positive for the economy and the consumer in particular.”

JPMorgan’s Feroli commented on this, “The spending numbers were clearly good, some of that due to higher spending on utilities because July was so hot,”

Lower housing prices fail to increase sales
Recent reports also showed the number of acquisition agreements on resale homes fell sharply for the first time in the month of July, after three months. The 1.3 percent decline in the pending home sales index further plunged by 2.4 percent last month, confirmed National Association of Realtors.

Ian Shepherdson, chief U.S. economist at the High Frequency Economics in Valhalla, N.Y., noted that housing industry is still on the rocks. Shepherdson said he was concerned that the stock market upheavals have induced customers to walk off after signing housing contracts. The sudden change in the consumer behavior shows huge discrepancies in the signed housing contracts and the actual purchases.