U.S. consumer spending wanes in July

U.S. consumer spending wanes in July    Signs the U.S. economy is facing a tougher recovery than expected continued to mount after last week's disappointing report that gross domestic product grew 1.3 percent in the second quarter, and first quarter growth was revised downward from 1.9 percent to only 0.4 percent.
   On Tuesday, the Commerce Department said consumer spending receded 0.2 percent in June, the first decline in consumer spending since September 2009. The day before, the Institute for Supply Management said its manufacturing index for July fell 4.4 percent to 50.9 percent, barely above the 50-point threshold that marks the line between growth and contraction. The index for new orders shows a pullback at 49.2 percent, indicating contraction for the first time in two years. Producer prices continue to fall, the ISM said, but domestic demand remains weak while exports remain strong.

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   Inventories also sharply fell 4.8 percent and actually shrank in July with a reading of 49.3 percent.
   Many economists have scaled back their economic forecasts for the second half of the year to the mid-2 percent range, but the U.S. economy could face further headwinds from the federal budget crisis. Large spending cuts anticipated at the federal level are likely to lead to more public sector layoffs, as has happened in many states. That will decrease the number of people earning paychecks with which to purchase goods and services, further slowing demand. ' Eric Kulisch