By YOUNG MONEY Staff
31 August 2011

The Bureau of Economic Analysis announced on Monday, August 29, that consumer spending in the U.S. jumped in July after a disappointing spring.

Despite only seeing a 0.3 percent gain in personal and disposable income, Americans increased personal consumption 0.8 percent. This comes after a 0.1 percent drop in June and a slow growth in April and May.

In real terms, disposable income actually fell by 0.1 percent, but consumption still rose a substantial 0.5 percent after seeing no change through May and June, as well as a 0.1 percent drop in April.

Reuters reports that the increase in spending surprised many economists, who broadly predicted a rise of around 0.5 percent.

The biggest factor in both the down-swing in spending this June and the recovery in July was motor vehicle purchases. This could suggest a recovery for the auto industry after suffering a setback in the wake of the earthquake in Japan, though optimism has been tempered.

"It remains to be seen whether July's improvement will carry over into the months ahead," Peter Buchanan, an economist at CIBC World Markets, told Reuters. "Confidence fell precipitously in the wake of the debt deal and credit downgrade and expectations for this Friday's payrolls suggest job creation remains weak."