Spending Report to Detail How Consumers Are Handling Inflation, Rising Interest Rates

The personal-consumption expenditures price index, the Federal Reserve’s preferred gauge of inflation, rose 6.3% in July from a year earlier. That was down from a 6.8% annual gain in June, a four-decade high.

Consumer spending, which accounts for roughly two-thirds of total U.S. economic output, has continued to rise in recent months despite high inflation, although the pace of growth has eased. Consumers nevertheless are under pressure from rapidly increasing prices, lingering supply-chain disruptions and rising interest rates that make mortgages and car loans more expensive.

Yet households continue to benefit from a strong labor market and, more recently, gasoline prices that have dropped sharply from a mid-June peak.

Retail sales picked up in August, driven by strong vehicle sales, a Commerce Department report released earlier in September said.

Friday’s report will give a broader view of household spending, including on services.

Economists polled by The Wall Street Journal estimate that consumer spending grew 0.3% in August, a pickup from 0.1% a month prior. They expect personal-income rose 0.3% from July.

Outdoor living products manufacturer

AZEK

Company Inc. is seeing resiliency among consumers despite factors weighing on the housing market, such as falling home prices and rising borrowing costs.

“We haven’t seen the consumer step back much,” said chief financial officer

Peter Clifford.

He added that his decking and siding company’s customers tended to be wealthier homeowners, often with equity in their home. “When we talk to our dealers—even recently—they’re not negative,” he said, adding “Their view of this year is pretty positive.”

Still, some economists are pessimistic about consumers’ ability to continue increasing spending. The slowing housing market is also weighing on purchases of goods such as furniture and appliances.

“The labor market is helping but inflation is taking it away,” Citi Global Wealth economist

Steven Wieting

said of consumers’ spending power. Falling imports and rising retail inventories “are telling us the consumption pace is going to weaken further,” he added.

Jacob Mizner said he has reined in his spending on groceries—both because of rising food costs and his recent decision to take a new, lower-paying job as an office manager for lifestyle and career reasons.

Mr. Mizner, 24 years old, of Shepherdsville, Ky., has switched to off-brand groceries, including buying hot dogs instead of red meat, and making coffee at home. He said he also switched internet providers to save money and tries to spend less when dining out.

“I couldn’t afford to spend what I was spending, I had to look at my budget,” he said. He is saving to buy a home, but said “interest rates are tough.”

Overall, the government’s statistics offer a mixed picture of the economy. U.S. applications for unemployment benefits fell last week to the lowest level since the spring, the Labor Department said Thursday, as many employers hesitate to lay off workers.

Consumers’ moods about the economy improved in September, the Conference Board said Tuesday. The consumer-confidence index, which measures American attitudes toward jobs and the economy, rose in September for the second month in a row, in part driven by falling gas prices.

The U.S. economy contracted in the first half of the year. But growth is expected to pick up for the third quarter, in part because of an expected narrowing in the trade deficit as a strong dollar makes imports cheaper. Inventory investment by companies as they adjust to supply-chain swings is also expected to boost economic growth.

S&P Global Market Intelligence, a research firm, said Thursday it estimates GDP increased at a 2.1% pace in the third quarter. Even so, many economists expect a U.S. recession next year, and financial markets are down for the year over worries about economic growth.

Write to Harriet Torry at [email protected]

The personal-consumption expenditures price index, the Federal Reserve’s preferred gauge of inflation, rose 6.3% in July from a year earlier. That was down from a 6.8% annual gain in June, a four-decade high.

Consumer spending, which accounts for roughly two-thirds of total U.S. economic output, has continued to rise in recent months despite high inflation, although the pace of growth has eased. Consumers nevertheless are under pressure from rapidly increasing prices, lingering supply-chain disruptions and rising interest rates that make mortgages and car loans more expensive.

Yet households continue to benefit from a strong labor market and, more recently, gasoline prices that have dropped sharply from a mid-June peak.

Retail sales picked up in August, driven by strong vehicle sales, a Commerce Department report released earlier in September said.

Friday’s report will give a broader view of household spending, including on services.

Economists polled by The Wall Street Journal estimate that consumer spending grew 0.3% in August, a pickup from 0.1% a month prior. They expect personal-income rose 0.3% from July.

Outdoor living products manufacturer

AZEK

Company Inc. is seeing resiliency among consumers despite factors weighing on the housing market, such as falling home prices and rising borrowing costs.

“We haven’t seen the consumer step back much,” said chief financial officer

Peter Clifford.

He added that his decking and siding company’s customers tended to be wealthier homeowners, often with equity in their home. “When we talk to our dealers—even recently—they’re not negative,” he said, adding “Their view of this year is pretty positive.”

Still, some economists are pessimistic about consumers’ ability to continue increasing spending. The slowing housing market is also weighing on purchases of goods such as furniture and appliances.

“The labor market is helping but inflation is taking it away,” Citi Global Wealth economist

Steven Wieting

said of consumers’ spending power. Falling imports and rising retail inventories “are telling us the consumption pace is going to weaken further,” he added.

Jacob Mizner said he has reined in his spending on groceries—both because of rising food costs and his recent decision to take a new, lower-paying job as an office manager for lifestyle and career reasons.

Mr. Mizner, 24 years old, of Shepherdsville, Ky., has switched to off-brand groceries, including buying hot dogs instead of red meat, and making coffee at home. He said he also switched internet providers to save money and tries to spend less when dining out.

“I couldn’t afford to spend what I was spending, I had to look at my budget,” he said. He is saving to buy a home, but said “interest rates are tough.”

Overall, the government’s statistics offer a mixed picture of the economy. U.S. applications for unemployment benefits fell last week to the lowest level since the spring, the Labor Department said Thursday, as many employers hesitate to lay off workers.

Consumers’ moods about the economy improved in September, the Conference Board said Tuesday. The consumer-confidence index, which measures American attitudes toward jobs and the economy, rose in September for the second month in a row, in part driven by falling gas prices.

The U.S. economy contracted in the first half of the year. But growth is expected to pick up for the third quarter, in part because of an expected narrowing in the trade deficit as a strong dollar makes imports cheaper. Inventory investment by companies as they adjust to supply-chain swings is also expected to boost economic growth.

S&P Global Market Intelligence, a research firm, said Thursday it estimates GDP increased at a 2.1% pace in the third quarter. Even so, many economists expect a U.S. recession next year, and financial markets are down for the year over worries about economic growth.

Write to Harriet Torry at [email protected]