Americans continue to splash out in July

Americans continued to splash out over the summer by dipping into their savings.

According to the Department of Commerce, personal spending jumped at a 0.6% month-on-month pace in July, edging past forecasts for a rise of 0.5%.

Personal incomes on the other hand grew by just 0.1% in comparison to June (consensus: 0.3%), although June's reading was revised up a by a tenth of a percentage point to 0.5%.

But consumers offset the shortfall by means of their savings, with the personal savings rate declining from 8.0% for June to 7.7% in July.

That compared to a savings rate of 8.8% at the end of 2018 and again in March.

Disposable personal incomes, or what is left after subtracting taxes, was 0.3% higher at constant dollars in comparison to the month before or by 0.1% when adjusted for inflation.

Price pressures meanwhile picked up slightly, with the year-on-year rate of change in the price deflator for personal consumption expenditures picking up from June's pace 1.3% to 1.4% in July.

At the core level however, the rate of increase in prices was steady at 1.6%.

Commenting on the latest personal income and spending data, Andrew Hunter at Capital Economics said: "Core PCE inflation will probably rise gradually over the rest of the year, particularly with unit labour costs growth rebounding.

"For now, however, the Fed looks content to use below-target inflation to justify further interest rate cuts."