Consumer spending falls in US

| August 5, 2008 | 0 Comments

Consumers in the US have been hit by the biggest increase in prices in almost 30 years.

The Commerce Department reported that consumer spending before removing inflation rose by 0.6% in June after a 0.8% increase in May.

The majority of that spending went to pay higher prices for petrol and other essential items. However, removing inflation, spending crept up by 0.3% percent in May and fell by 0.2% in June.

In related news, new orders received by US factories increased by 1.7% in June, which was larger than anticipated.

One of the biggest contributors was a high demand for military equipment, which increased by 16.9%. In addition, a 5.2% increase was noted in order for primary goods including steel.

It has been announced today that the US Federal Reserve has left interest rates unchanged at 2% as it battles with high inflation and a possible recession.

US interest rates have been on hold since April after aggressive cuts in late 2007 and early 2008.

As a result of the slump in the US property market and falling consumer confidence, an imminent increase in rates is unlikely in spite of signs of increasing inflationary pressures.

The Bank of England’s Monetary Policy Committee are due to meet later this week to discuss their decision on interest rates. It is widely expected that interest rates will remain on hold at 5% as, like the US Federal Reserve, it battles with runaway inflation and fears of a recession.

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