The US consumer spending witnessed an unexpected fall in July as the savings surged to their highest level in more over one and half years.
The savings rose to USD 739.1 billion in last month. July’s figures were the highest level since December 2012 when the savings rate was at 5.7 percent.
Analysts said that the changing trend in consumer behavior suggested that the US economy is witnessing a shift in households’ approach which is now more vigilant and cautious in spending many despite a boost in the economic and jobs growth.
According to the Commerce Department report released on Friday, consumer spending declined 0.1 percent in July. This was the first fall reported since January this year.
Consumer spending accounts to over two-thirds of the US economic activity.
According to the financial analysts, the consumer spending was expected to rise 0.2 percent last month.
Jim Baird, chief investment officer at Plante Moran Financial Advisors said, “On the income side, we’re still lagging a bit, so consumers are having a hard time getting out of second gear.”
Other economic sectors including business spending, exports, housing and other government activities have zoomed this year.
Boosting the economic scenario, the conditions of the US labor market also strengthened.
The weakness in consumer spending at the third quarter’s beginning is likely to bring no remarkable changes in the perceptions that the American economy has retained its second-quarter pace.
The incomes grew 4.3 percent last month, from the same period a year earlier, without adjusting for inflation.
But analysts say the income gains still remain below the annual average rise of about 6 percent seen during the past 35 years.
The unemployment rate was at 6.2 percent in July, down more than a percentage point from the same period in 2013.