31-Aug-2010 10:36 AM

Consumer spending in US exceeds forecast; downward revision for 2Q2010 GDP

US Commerce Department stated consumer spending rose more than forecast in Jul-2010, exceeding gains in incomes and indicating the economy may avoid slipping back into a recession. Purchases rose 0.4%, the most since Mar-2010, while incomes increased 0.2% and real disposable income decreased 0.1%. US Commerce Under Secretary for Economic Affairs, Rebecca Blank, commented: “Consumer spending adjusted for inflation continues to increase at a moderate pace. These data suggest that the economy continues to grow, as consumer spending accounts for 70% of GDP". She however added that the "economy is growing at a slower pace than we would like.” Separately, the Department stated (27-Aug-2010) real GDP in 2Q2010 was lowered to 1.6% at an annual rate from the advanced estimate of 2.4%.Ms Blank added: “The downward revision to GDP growth stemmed primarily from unusual and surprisingly large swings in inventories and net exports late in the quarter. Although the economy has slowed somewhat, American consumers increased their spending for a fourth consecutive quarter with disposable personal income increasing at more than a 4% annual rate. Business investment also grew at a solid pace."

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