TCA Financial Consumer spending in the United States rose for the fourth month in a row in July amid robust demand for automobiles, heralding an uptick in economic growth that could potentially enable the Federal Reserve to hike interest rates later this year.
The US Commerce Department said that consumer spending, which represents close to 70% of the country’s economic activity, increased by 0.3% last month after an upwardly revised 0.5 percent gain in June.
July's increase was in line with consensus estimates and appears to have kept some of its momentum from the second quarter, when it grew at a 4.4% annualized pace, its fastest in nearly two years. That increase went part of the way to easing concerns over the impact of a marked inventory fall and a protracted downturn in business investment.
Overall, the economy grew at an uninspiring 1.1% rate in the second quarter leading many to question the rational for the Federal Reserve’s continuing rhetoric on rate hikes.
“Certainly, the improved consumer spending data will be welcomed but is it enough to warrant a hike in US interest rates when it’s clear we’re coming to end of the longest, most lackluster economic recovery in US history” asked Colin Phipps, chief economist at TCA Financial.
“Interest rates are traditionally raised when an economy displays signs that, at some point in the immediate future, it will begin to overheat. The US economy couldn’t be any further away from overheating if it tried,” he added.
TCA Financial says it expects US economic growth to top out at 1.8-1.9% for 2016 and sees no hike in rates this year.

About TCA Financial:
TCA Financial is resolutely committed to helping our clients accumulate and preserve wealth by actively managing the deployment of their investment capital within the global financial markets. We have a proven, checkable track record of being able to accomplish this regardless of the prevailing macro-economic conditions because of our expertise and professionalism and because we know that markets, just like people, are all connected to varying degrees at varying times.