U.S. Consumer Spending Falls in June

U.S. consumer spending fell 0.7 percent in June, adjusted for inflation, spending decreased 0.9 percent, the Commerce Department said today, while incomes rose moderately 0.2 percent.

The numbers surprised analysts that predicted a modest fall of 0.1 percent in spending and income increasing 0.2 percent. The department said disposable income rose 0.2 percent, but was unchanged when inflation was taken into account.

During the second quarter consumer spending advanced at a snail pace of 1 percent annual rate, the department said, the slowest since the recession in 2001.

However analysts are not pointing at luxury items such as jewelry and watches as suffering from this downturn, but rather at soft auto sales.

In response, next Tuesday the Federal Reserve is expected to raise overnight interest rates by a quarter-percentage point to 1.5 percent.