U.S. households rapidly increased their spending last month as inflation accelerated to the worst rate in four decades.
The Commerce Department said Friday that consumers spent 1.1 percent more in June, up from a 0.3 percent rise in May. That was just 0.1 percent more than the Commerce Department’s inflation gauge, the personal consumption price index, rose for the month, indicating very minimal real growth in consumer spending.
Other measures of inflation show prices rising even more rapidly. The Department of Labor’s index of inflation faced by wage-earners had prices rising 1.6 percent in June.
Income growth fell behind both measures of inflation as well as spending. Personal income rose 0.6 percent last month, the same as May. This indicates that consumers are spending down their savings or borrowing to finance purchases at inflated prices.
After adjusting for inflation and taxes, incomes fell 0.3 percent.