Still, the reports on Friday from the Commerce Department likely do not signal a recession is looming as consumer spending remains supported by solid income growth, thanks to the lowest unemployment rate in nearly 50 years and massive savings."Consumer spending slowed in August as the market turbulence and trade war escalation had shoppers stepping back from the stores and malls and saving more for a rainy day," said Chris Rupkey, chief economist at MUFG in New York.
Consumer spending has been blunting some of the hit on the economy from the White House's nearly 15-month trade war with China, which has sunk business investment and manufacturing.But with tariffs on Chinese goods broadened to include consumer goods, there are fears that spending could slow. There are also worries that weak business investment and sluggish profit growth could constrain companies' ability to continue hiring more workers, and undermine consumer spending.
In another report on Friday, the Commerce Department said orders for non-defence capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.2 per cent last month amid weak demand for electrical equipment, appliances and components, and computers and electronic products.Data for July was revised down to show these so-called core capital goods orders unchanged instead of gaining 0.2 per cent as previously reported.
Powell last week said trade policy tensions, which"have waxed and waned, and elevated uncertainty is weighing on US investment and exports," adding that US central bank contacts had told policymakers that trade policy uncertainty"has discouraged them from investing in their businesses."The economy grew at a 2.0 per cent annualised rate last quarter, slowing from the January-March quarter's brisk 3.1 per cent pace.
Excluding the volatile food and energy components, the PCE price index edged up 0.1 per cent last month after rising 0.2 per cent in July. That lifted the annual increase in the so-called core PCE price index to 1.8 per cent in August, the biggest gain since January, from 1.7 per cent in July.