Consumer spending accounts for about 70% of gross domestic product (GDP) and notched a 0.5% month-over-month rise in July, marking the highest increase in four months. In addition, the reading accelerated from 0.4% in June, which was revised higher from 0.3%.
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In dollar terms, consumer spending increased by $108.9 billion, split between $48.7 billion in goods and $60.2 billion in services. Motor vehicles and parts led the way, rising by $34.9 billion, while financial services and insurance trailed behind with a $24.1 billion uptick.
Consumer Spending Drives GDP Recovery Despite Tariff Concerns
On Thursday, the Commerce Department issued its second estimate of second quarter GDP at 3.3%, 0.3% higher than its first estimate. GDP fell by 0.5% during the first quarter as imports surged. Consumer spending grew by 1.6% quarter-over-quarter, more than tripling the growth of 0.5% during the first quarter.
Wage growth has helped uplift consumer spending, although companies remain hesitant to hire new employees in light of higher costs from tariffs.
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