Americans spending more as interest rate cuts loom

Americans' personal spending on goods and services increased by roughly $104 billion in July, the Bureau of Economic Analysis reported Friday. At 0.5 percent, that’s higher than the month-over-month increase of 0.3 percent in June, but not as high as the 0.7 percent increase in March, the bureau added. Prices for goods and services have increased roughly 2.5 percent above what they were a year ago. U.S. workers did see a bump in personal income in July—but not as large of a bump as they saw in March.

What are Americans spending more money on? U.S. consumers spent almost $60 billion more on services such as housing and utilities in July, the bureau reported. Meanwhile, Americans spent roughly $45 billion on goods. Motor vehicle repairs took the top spot among the goods Americans purchased.

Why has spending increased? Even when researchers factor out increases in volatile food and energy costs, the rate of price increases remains roughly the same. As such, Americans must spend more than they did this time last year.

The Federal Reserve this month signaled it would soon lower its key interest rates. The Fed has kept those rates at around 5.25-5.5 percent for more than a year in an attempt to reduce inflation to around 2 percent. Inflation sits at around 2.5 percent right now but the central bank was confident it would continue its plan to cut rates, Federal Reserve Chairman Jerome Powell said.

Dig deeper: Listen to Nick Eicher and David Bahnsen’s Monday Moneybeat conversation on The World and Everything in It podcast from this week.