Consumer Spending Probably Decelerated: U.S. Economy Preview

Consumer spending in the U.S. probably rose in July at half the pace of the previous month, showing the biggest part of the economy is struggling to rebound, economists said before reports this week.

Purchases increased 0.2 percent after a 0.4 percent gain in June, according to the median estimate of 61 economists surveyed by Bloomberg News before a Commerce Department report Aug. 28. Other figures may show orders for long-lasting goods jumped and sales of new homes improved.

The government’s “cash-for-clunkers” plan revived auto sales last month just as Americans cut back on items such as furniture and electronics. Depressed home values and the biggest employment slump since the 1930s will prompt households to save more, meaning an economic recovery will be slow to gain speed even as housing and manufacturing stabilize.

“It’s hard to see consumer spending driving the economy forward given the losses of wealth that have occurred,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “The consumer isn’t going to play a leading role in this recovery,” he said, in part because “employment is going to keep falling.”

Auto industry data showed sales of cars and light trucks rose to an 11.2 million unit annual pace in July, the most since September, after the government offered credits of up to $4,500 to trade in gas-guzzlers for more fuel-efficient vehicles under the cash-for-clunkers program.

‘Cash-for-Clunkers’

The government said last week that it will stop accepting dealer applications for the incentive at 8 p.m. New York time tomorrow. The $3 billion program has recorded more than 489,000 dealer transactions worth $2.04 billion in rebates, according to Transportation Department data released Aug. 21.