Consumer spending rises, but recovery is restrained
US economy shrinks at 32.9% annual rate in 2Q
FOX Business Cheryl Casone breaks down second-quarter GDP and initial jobless claims.
Consumers increased spending 5.6% in June but appear to have pulled back since then, restraining the economy's recovery from the coronavirus outbreak
Continue Reading Below
Americans' ability and willingness to spend will largely determine the economy's path in the coming weeks and months.
Household spending reflects two-thirds of economic demand in the U.S. A sharp drop in spending — tied to business closures and fears of the virus — was the biggest reason the U.S. economy contracted at a record rate in the second quarter.
FED'S POWELL SAYS US ECONOMY MAY NEED MORE POLICY HELP TO AVOID 'PROLONGED' RECESSION
Americans reduced spending on things such as doctors' visits, dining and vacations.
Economists believe households boosted spending in June, at the end of the second quarter, which would mark the second consecutive monthly increase. But the growth almost certainly wasn't large enough to make up for the sharp drop in spending earlier this spring caused by the coronavirus pandemic.
Household incomes also likely dipped last month, as worker layoffs remained high and the effects of federal stimulus payments faded. Extra unemployment benefits that have pumped billions of dollars a week into workers' pocketbooks will expire at the end of July without action from Congress.