US consumer spending up 5.6%, but virus could stall gains

FILE — In this June 17, 2020 file photo, a sign advertises a sale at an H&M store along Lincoln Road Mall in Miami Beach, Fla. U.S. consumer confidence had a sharp drop in July to a reading of 92.6 as coronavirus cases in many parts of the country began rising again. (AP Photo/Lynne Sladky, File

WASHINGTON — American consumers increased their spending in June by a solid 5.6%, helping regain some of record plunge that occurred after the coronavirus struck hard in March and paralyzed the economy. But the virus’ resurgence in much of the country could impede further gains.

Last month’s rise in consumer spending followed a seasonally adjusted 8.5% surge in May after spending had plunged the previous two months when the pandemic shuttered businesses, caused tens of millions of layoffs and sent the economy into a recession.

Now, with confirmed viral infections rising in a majority of states, many businesses have had to pause their reopenings or close a second time and cut jobs, thereby putting consumers under renewed pressure. The number of laid-off Americans who have applied for unemployment benefits has topped 1 million for 19 straight weeks. All told, roughly 30 million people are out of work, the government says.

Friday’s Commerce Department report showed that the June increase in consumer spending coincided with a 1.1% drop in personal incomes, which followed an even bigger 4.4% fall in incomes in May. Those sharp declines followed a 12.1% surge in incomes in April as a flood of government aid began to be distributed, notably $1,200 checks for many individuals and a $600 a week in federal unemployment benefits.

The $1,200 checks have been largely spent, though, and the $600 in unemployment benefits is expiring.