Consumer spending and incomes likely posted slight gains in June

Ahead of the Bell: Consumer spending and incomes

WASHINGTON — Consumer spending and incomes likely posted tiny gains in June, providing further evidence that the economic recovery slowed in the spring and early summer.

Economists surveyed by Thomson Financial expected consumer spending rose 0.1 percent in June while incomes edged up 0.2 percent. The Commerce Department is scheduled to release the new figures at 8:30 a.m. EDT Tuesday.

A rise of 0.1 percent in spending would follow a modest 0.2 percent gain in May while the 0.2 percent rise in incomes would be just half the 0.4 percent increase in May incomes.

Analysts said the weakness they expect in spending and incomes is a reflection of a slowdown in the overall economy. The government reported Friday that the economy, as measured by the gross domestic product, grew at an annual rate of just 2.4 percent in the April-to-June quarter, weaker than the 3.7 percent growth turned in during the first three months of the year and a 5 percent GDP growth spurt in the fourth quarter of last year.

The economy has been growing for a year but the rebound has been just about half the speed of a normal recovery from a recession that was as deep as the 2007-2009 downturn, the worst slump since the Great Depression of the 1930s.

Economists are now concerned that growth will slow even further in the final six months of this year as consumers, still worried about unemployment that remains near double-digit levels, cut back more on spending. Consumer spending is closely watched because it accounts for 70 percent of economic activity.

The unemployment rate stood at 9.5 percent in June and economists believe it will inch up to 9.6 percent in July, a figure that will be released by the government on Friday.

The problem is that the economy has not grown fast enough in this recovery to make a significant dent in the jobless rate leaving consumer spending depressed even as some sectors of the economy, notably manufacturing, improve.

Federal Reserve Chairman Ben Bernanke said Monday that the nation faces a long road to get back to a solid growth rate even though he said progress had been made in dealing with the serious financial crisis that struck with force in the fall of 2008 following the collapse of Lehman Brothers.

“We have a considerable way to go to achieve a full recovery in our economy,” Bernanke said in a speech in Charleston, S.C. “Many Americans are still grappling with unemployment, foreclosure and lost savings.”