U.S. consumer spending slowed in August, with a key retail sales gauge unexpectedly declining, as extended unemployment benefits were cut for millions of Americans, offering more evidence that the economic recovery from the COVID-19 recession was faltering, Reuters reported. The report from the Commerce Department on Wednesday ramped up pressure on the White House and Congress to restart stalled negotiations for another fiscal package. At least 29.6 million people are on unemployment benefits. Consumer spending accounts for more than two-thirds of the U.S. economy. The Federal Reserve yesterday kept interest rates near zero, noting that the pandemic “will continue to weigh on economic activity” in the near term, “and poses considerable risks to the economic outlook over the medium term.” Fed Chair Jerome Powell told reporters more fiscal support is likely to be needed. “Consumers are being increasingly cautious with their spending,” said Gregory Daco, chief U.S. economist at Oxford Economics in New York. “If Congress is unable to extend fiscal aid to households in the coming weeks, the economy will be particularly susceptible to a cutback in consumer spending, especially from the lowest-income families.” Retail sales excluding automobiles, gasoline, building materials and food services dipped 0.1% last month after a downwardly revised 0.9 percent increase in July. These so-called core retail sales, which correspond most closely with the consumer spending component of gross domestic product, were previously reported to have advanced 1.4 percent in July.
