Consumer spending climbed 1.1% in June with higher fuel and food costs amid 40-year record high inflation that is continuing to eat away at paychecks and household budgets, the U.S. Bureau of Economic Analysis (BEA) reported on Friday (July 29). May’s report from the commerce department showed an increase in consumer spending of 0.2%.
Economists polled by The Wall Street Journal had forecast a 0.9% increase for June. Consumer spending accounts for about two-thirds of total economic output.
Neil Saunders, managing director of analytics company Global Data, told the Washington Post that while the 1.1% percent “looks robust,” it was inflation that was the reason for the uptick.
“So, essentially Americans are having to spend more to buy the same amount of stuff,” Saunders said. “The increase in expenditure is also running well below the increase in income, which suggests that many households are having to dip into savings or take on debt to fund their spending.”
See also: Inflation, Consumer Spending Dominate Earnings, Fed’s Focus
The Federal Reserve announced a 75 basis point rate hike on Wednesday (July 27), and its Federal Open Market Committee (FOMC) statement didn’t address much about the state of consumer spending except that it had “softened,” PYMNTS reported.
That news comes on the heels of PYMNTS data that shows 53% of consumers said their financial condition is worse this year than last.
Read more: New Study Finds 70% of US Consumers Cutting Back on Nonessential Retail Purchases
The BEA report showed that personal income rose by 0.6% last month, the same as in May, but after taxes and adjusting for inflation, incomes actually dropped by 0.3%.
The personal consumption expenditures (PCE) price index increased 6.8% from the same time last year, reflecting increases in both goods and services. Energy prices increased 43.5% and food went up 11.2%.
Related: Banks Watch Nervously From Sidelines as 9.1% Inflation Crushes Consumers