US consumers are spending more, despite rising inflation

The U.S. Bureau of Economic Analysis released its third and final estimate of second-quarter GDP on Thursday, confirming that the U.S. economy contracted for the second consecutive quarter amid an environment awash in global crises and uncertainties. Real GDP declined at an annual rate of 0.6 percent in the second quarter, up from a 1.6 percent decline in the first quarter.

Consumer spending, by far the largest component of the gross domestic product, once again proved to be surprisingly resilient in the face of surging inflation. According to the BEA, inflation-adjusted personal consumption expenditures increased at an annual rate of 2 percent in the second quarter, partly offsetting a 14 percent decline in gross private domestic investment. Measured in chained 2012 dollars, real personal consumption expenditures amounted to $14.1 trillion on an annualized basis in Q2 2022, up from $13.8 trillion a year earlier.

While consumers kept spending despite rising prices through the second quarter, there are some warning signs as spending on goods, led by food and beverages, declined for the second consecutive quarter. Meanwhile services spending increased at an annual rate of 4.6 percent in Q2, as Americans spent more on food services and accommodation compared to the preceding quarter.