WASHINGTON: US consumer spending slowed in August, with a key retail sales gauge unexpectedly declining, as extended unemployment benefits were cut for millions of Americans, offering more evidence that the economic recovery from the Covid-19 recession was faltering.
The report from the Commerce Department yesterday could ramp up pressure on the White House and Congress to restart stalled negotiations for another fiscal package. At least 29.6 million people are on unemployment benefits. Consumer spending accounts for more than two-thirds of the US economy and signs of fatigue are likely to grab the attention of Federal Reserve officials as they wrap up a two-day policy meeting.
Retail sales excluding automobiles, gasoline, building materials and food services dipped 0.1 per cent last month after a downwardly revised 0.9pc increase in July. These so-called core retail sales, which correspond most closely with the consumer spending component of gross domestic product, were previously reported to have advanced 1.4pc in July.
Economists polled by Reuters had forecast core retail sales rising 0.5pc in August. Overall retail sales increased 0.6pc in August, in part as higher gasoline prices supported receipts at service stations. Data for July was revised down to show retail sales increasing 0.9pc instead of 1.2pc as previously reported.
The retail sales report followed data this month suggesting the labour market was losing speed after astounding employment gains in May and June as businesses reopened after being shuttered in mid-March to control the spread of the coronavirus.
Job growth slowed further in August and new applications for unemployment benefits remained perched at extraordinarily high levels in early September. At the same time, manufacturing is also showing signs of tiring, with output slowing last month.
A $600 weekly unemployment subsidy expired in July. It was replaced by a $300 weekly supplement, which was not available in all states, and funds for the programme are expected to run out this month. Economists estimated that the reduced unemployment benefits supplement cut income by about $70 billion in August.