What's going on?

Wednesday saw global markets continue to recover from the Brexit vote and there was some good US economic data released. Spending by Americans (a.k.a. �consumer spending�) rose 0.4% in May. It�s another sign that the US economy is picking up somewhat after a lacklustre start to the year.

What does this mean?

Consumer spending (e.g. you buying an iPhone) accounts for about two-thirds of the economy in the US � so it�s certainly important. Data also showed that people�s incomes are (slowly) rising, which suggests pay is holding up despite an evident slowdown in hiring. People�s confidence also seems to have improved � and that�s leading them to spend more of their income rather than save it (which is good, at least, for the economy in the short-term). It also turns out that the US economy grew more in the first quarter than initially thought.

Why should I care?

The bigger picture: Does the Brexit vote matter to the US economy? Probably not in a big way, but we�re about to find out. Assuming that financial markets don�t crash (which is looking even less likely now in light of the market�s rebound), Americans will carry on with their lives, i.e. their spending won�t be impacted. For Europeans and Brits, of course, it�s a different story (although quite how negative an effect it will have, even in the short-term, is debatable).

For the markets: Will a stronger economy cause the US Federal Reserve (the Fed) to raise interest rates? Probably not anytime soon. One way that the Brexit vote could hurt the US economy is if the US dollar went up in value a lot versus other major currencies – which it did in the days after the vote. If the Fed were to raise interest rates, it would likely cause the dollar to go even higher (explanation here) – and that could imperil the US economy, for example, by making it harder for US firms to sell goods overseas.