U.S. consumer spending surged in June, indicating that the economy accelerated solidly in the second quarter. The momentum seemed to have continued in the third quarter after a separate report on Tuesday indicated that manufacturing activity in New York grew markedly in July.
The Commerce Department reported that core sales, which are adjusted for volatile items such as automobiles, food, building materials and gasoline, rose 0.6 percent in June, compared to 0.2 percent in May.
“This is not a fragile economy,” Chris Rupkey, a New York-based chief financial economist at Bank of Tokyo-Mitsubishi UFJ told Reuters. “The consumer continues to play their part in moving the economy forward.”
In the meantime, the Federal Reserve of New York reported that its Empire State business conditions index rose to 25.60 in July, the strongest level since April 2010, from June’s reading of 19.28. New orders surged while shipments and factory jobs increased.
The total retail sales last month were held back by a 0.3 percent drop in auto sales, which is puzzling considering that carmakers said that motor vehicle sales in June had increased. Sales of autos had grown by 0.8 percent in May. Minus autos, retail sales increased 0.4 percent after also increasing by the same pace in May.
The reports indicate that the economy is growing strongly, though Federal Reserve Chair Janet Yellen cautioned that the recovery isn’t complete due to the slack in the labor markets. Yellen reaffirmed that the Fed will increase interest rates if the labor market strengthens faster than expected.
The labor market is getting stronger, with the jobless rate declining close to the lowest level in six years of 6.1 percent, while the number of new hires has continuously surpassed the 200,000-mark for five consecutive months. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
To contact the reporter of this story; Jonathan Millet at email@example.com