U.S. households boosted spending by 1% in June as consumers shelled out more on services at the start of the summer, but a current upswing in Covid-19 cases related to the Delta variant is injecting uncertainty into the economic outlook.
Personal-consumption expenditures–a measure of household spending on goods and services–increased last month, the Commerce Department reported Friday, beating economists’ expectations for a 0.7% rise. That followed a downwardly revised 0.1% drop in May, when consumers pulled back on purchases of goods but boosted spending on services.
Friday’s report also showed Americans’ personal income rose 0.1% in June. Still, rising inflation and the latest surge in virus cases could affect future spending trends.
Inflation has accelerated this year as the economy faces supply-chain bottlenecks and materials shortages. Friday’s report showed that the core personal-consumption expenditures price index–a measure of inflation that excludes often-volatile prices for food and energy–was up 3.5% in June from a year ago, compared with a 3.4% yearly increase in May.
Americans have been doling out money to resume activities outside the home since state and local governments eliminated Covid-19 restrictions earlier this year, a trend that has particularly benefited service-sector industries, such as restaurants and travel. They had been battered earlier in the pandemic as Americans stayed indoors and shifted spending toward household items and other goods.
The Delta variant has prompted some local governments to reimpose mask mandates, and the Centers for Disease Control and Prevention this week recommended that vaccinated Americans in certain areas wear masks indoors. Some businesses have announced new restrictions or delayed office-reopening plans. Many economists so far don’t think the developments will significantly hamper growth, with businesses and consumers adapting to each phase of the pandemic.