Services buoy US consumer spending

US consumer spending surged in June as vaccinations against Covid-19 boosted demand for travel-related services, but part of the increase reflected higher prices, with annual inflation accelerating further above the Federal Reserve's 2 per cent target.

Though personal income barely rose last month, other data on Friday showed wage growth in the second quarter was the fastest in 13 years on an annual basis.

That, together with rising household wealth and ample savings should keep consumer spending strong, though rising Covid-19 infections pose a risk.

"The overall trend of healthy-to-strong growth will continue into next year," said Scott Hoyt, a senior economist at Moody's Analytics in West Chester, Pennsylvania.

 "Downside risks remain large. The return of shutdowns from increased infections is unlikely, but cannot be ruled out. There are also upside risks, especially given all the extra saving since the spring of 2020."

Consumer spending, which accounts for more than two-thirds of US economic activity, rebounded 1.0 per cent last month after dipping 0.1 per cent in May, the Commerce Department said. Economists polled by Reuters had forecast consumer spending rising 0.7 per cent.