High US spend likely to bring early rate hike

Lauren Fedor
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US CONSUMER spending recorded its largest increase in nearly six years last month, thanks to strong demand for automobiles and other pricey items, according to official data out yesterday.

The US commerce department said that consumer spending rose 0.9 per cent last month, the biggest gain since August 2009, after a 0.1 per cent rise in April.

Economists pointed to the strong numbers as further evidence that US economic growth was accelerating in the second quarter.

Meanwhile, other data published yesterday showed a modest increase in first-time applications for unemployment benefits, the underlying trend in jobless claims continued to suggest the labour market was tightening.

Many economists believe that the strengthening economy will lead the Federal Reserve to raise interest rates as soon as this September, even as inflation remains well below the US central bank’s two per cent target.

“This portends well for second-quarter growth and the broader momentum of economic activity in the second half of the year, and keeps the prospect of a September rate hike squarely on the table,” Anthony Karydakis, chief economic strategist at Miller Tabak, said yesterday.