In August, consumer spending in the United States, adjusted for inflation, increased by 0.55% from the previous month and 2.6% year-over-year, according to the Bureau of Economic Analysis. This growth occurred despite rising gasoline prices and various economic uncertainties, with spending particularly strong in discretionary areas like dining and travel.
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Nominally, consumer spending jumped by 0.86% from July, reaching an annualized rate of $22.3 trillion, reflecting a 6.1% increase compared to the same month last year. This surge indicates that while inflation persists, consumer willingness to spend remains robust.
Services accounted for 69% of total spending, with healthcare and housing together representing half of that. Durable goods comprised 11%, with nondurable goods making up the remaining 20% of expenditures. Despite consumer frustrations over food and gasoline prices, these categories only represent a small portion of overall spending: food and beverages account for 7% and gasoline for 2.3% of consumer spending.
For accurate inflation adjustments, price changes for each good in the consumer basket are tracked. This leads to nominal spending figures, which offer a clearer picture of consumer behavior. In August, unadjusted spending on services increased by 0.50% month-to-month and 5.9% year-over-year.
Key growth areas included:
- Housing and utilities: +0.26% monthly; +4.5% YoY
- Healthcare services: +0.39% monthly; +6.8% YoY
- Financial services: +0.48% monthly; +7.6% YoY
- Food services and accommodation: +1.31% monthly; +5.2% YoY
Nondurable goods spending rose by 1.5% from July and 5.9% year-over-year, driven largely by spikes in gasoline prices. Adjusted spending on gasoline showed a decline over the same period. In other nondurable categories, spending included:
- Other nondurable goods: +1.45% monthly; +4.5% YoY
- Food and beverages bought at stores: +0.74% monthly; +2.4% YoY
- Clothing and footwear: +1.5% monthly; +6.9% YoY
- Gasoline: +4.3% monthly; +24% YoY
Durable goods spending rose 2.0% month-to-month and 6.4% year-over-year, marked by significant purchases in recreational items and motor vehicles. Notable increases included:
- Motor vehicles & parts: +2.5% monthly; +7.3% YoY
- Recreational goods and vehicles: +2.3% monthly; +8.8% YoY
- Furnishings and household equipment: +1.2% monthly; +5.9% YoY
The combination of rapid consumer spending growth and substantial inflation signals that the economy is currently “running hot.” This trend is also reflected in a significant rise in business investments and an increased federal deficit. The bond market is responding, with the yield on the 10-year Treasury note reaching 5.30%, the highest level since mid-2007.