Americans spent more than expected in June as they got outdoors and traveled more, but they’re paying higher prices.
The Commerce Department said Friday consumer spending rebounded 1% last month from a 0.1% dip in May. Household expenditures accounts for two-thirds of U.S. economic activity, and that robust spending helped boost economic growth 6.5% in the latest quarter.
With nearly half the U.S. population vaccinated, Americans are spending more on services as they travel, eat out and attend sporting events.
At the same time, the pace of spending on goods has slowed. Amid severe product shortages, car buyers can’t find what they want at dealerships and homeowners can’t get the appliances they want. Tight supplies of chips have hampered production.
But as demand outpaces supply, inflation is heating up. The core personal consumption expenditures index shot up at an annual rate of 3.5%. It’s speeding up faster than the Federal Reserve’s target of 2%. But Fed Chair Jerome Powell insists inflation is temporary.