WASHINGTON (AP) - The personal income fell in July while consumer spending slowed significantly to remove the impact of tax refunds issued weeks earlier by the government to stimulate the economy.
The Commerce Department reported on Friday that personal incomes fell by 0.7% in July, the biggest setback in nearly three years and well above the 0.1% forecast by analysts.
The consumer spending rose modestly by 0.2%, as predicted, but well below the increase of 0.6% in June. Taking into account the impact of costly in prices, spending fell in July in real terms by 0.4%, the lowest level adjusted for inflation in four years.
The figures for revenue and expenditure in July served to cement fears that the economy, which grew in the second quarter more than estimated due to tax refunds, could reverse in coming months to remove their impact.
Some economists fear that overall economic growth, which increased the rate of 3.3% annually between April and June, could move to less than half that figure in this quarter, and could even go into negative territory in the past three months of this year and in the first quarter of 2009.
Two consecutive quarters of decline in the gross domestic product, which measures all goods and services produced in the United States and is the best barometer of the country's economic health, the formula that would confirm a recession.
Moreover, an index of inflation that is followed closely by the Fed, remained high in July, rising by 0.6%. In the past 12 months, this index matched to consumer spending rose by 4.5%, the highest annual increase in more than 17 years.
