Forex News – U.S. consumer spending rose in July showing economy not slowing down

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Risk appetite got a boost after U.S. consumer spending data jumped 0.8 percent in July on strong demand for motor vehicles, after dropping 0.1 percent in June. This was the fastest rate of increase in five months, giving evidence that the U.S. economy is not falling back into a recession.

The data is quite important indicator of the health of the U.S. economy since personal spending makes up for about 70 percent of the U.S. economy, and the number was more than the expected 0.5 percent increase.

When adjusted for inflation, spending rose 0.5 percent last month, the largest gain since a matching increase in December 2009, after being flat in June.

The data was the latest to suggest the economy began the third quarter with some growth after having stalled in the first half of the year.

Growth data recently have shown that the U.S. economy expanded at a 1 percent pace in the second quarter after growing only 0.4 percent in the prior quarter.

A breakdown of the consumption data today shows that real spending on durable goods increased 2 percent last month, likely reflecting a pick-up in motor vehicle sales as the shortage of autos caused by the supply disruptions from the Japan earthquake have now picked up pace.

Overall spending in July was boosted by a 0.3 percent rise in income as employers began hiring more staff. Income rose 0.2 percent in June and economists had expected a 0.3 percent increase last month.

The data boosted risk currencies like the euro and commodity-linked currencies like the Canadian dollar. Meanwhile, the greenback jumped against the safe havens like the yen and the Swiss franc.