US consumer spending stagnates, home sales retreat

Consumer spending, pending home sales and factory orders were all weaker than projected in June, showing the US recovery lost momentum heading into the second half of the year as employment stagnates.

Household purchases, which account for about 70 per cent of the economy, were unchanged from May, according to figures from the Commerce Department issued today in Washington. Contracts to buy existing houses unexpectedly dropped for a second month and factory bookings fell more than twice as much as economists estimated, other reports showed.

Stocks dropped, depressed by earnings at companies like Procter & Gamble Co that showed some Americans are cutting spending on name brands as the jobless rate hovers near 10 per cent. Slower growth means it will take even longer to regain the 8.4 million jobs lost during the worst economic slump since the 1930s.

“The consumer is less willing to spend,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia, who projected purchases would stall. “Soft labour markets are likely to remain so through 2013. There’s not a lot of opportunity for income growth.”

The Standard and Poor’s 500 Index fell 0.2 per cent to 1,123.8 at 11:59 am in New York as shares of Procter & Gamble slumped 3.9 per cent. The dollar dropped and Treasury securities rose, sending the yield on the benchmark 10-year note down to 2.91 per cent from 2.96 per cent late yesterday.

Meanwhile, Federal Reserve policy makers signalled they will probably pass on providing more stimulus at their August 10 meeting and wait to see if signs of weaker economic growth persist.

Earlier, US Fed Chairman Ben S Bernanke had told lawmakers in South Carolina that consumer spending is “likely to pick up” amid a “moderate” expansion.