U.S. Consumer Spending Stalls in July as Inflation Remains Elevated

US consumers held inflation-adjusted spending essentially flat in July, as higher income and increased saving offset stronger service-sector purchases and declines in goods spending.

US consumers increased their savings in July as inflation-adjusted spending remained essentially unchanged.

Real personal consumption expenditures were unchanged from June, when they increased 0.4%, according to the US Bureau of Economic Analysis.

The Federal Reserve's preferred inflation gauge, the personal consumption expenditures price index, rose 0.2% in July and was up 3.7% from a year earlier. Core PCE inflation, which excludes food and energy, also increased 0.2% during the month and 3.3% year over year.

Household finances did not deteriorate across the board. Disposable personal income increased 0.5% in July, while real disposable income rose 0.4%.

The personal saving rate increased to 3.0% from 2.6% in June.

Current-dollar consumer spending rose 0.2%, driven by an $86.2 billion increase in services spending that more than offset a $49.9 billion decline in goods spending. The figures suggest consumers shifted spending toward services while pulling back on merchandise purchases.

The data indicate a consumer sector that is still supported by income growth but showing signs of caution.

The increase in saving may also signal that some households are becoming more reluctant to sustain the pace of spending seen earlier in the summer.

The July figures add to the Federal Reserve's policy challenge as officials weigh persistent inflation against signs of moderating consumer demand ahead of their Sept. 15-16 meeting.

The Fed has held its federal funds target range at 3.50% to 3.75% since the start of the year.