What's going on?

On Friday, economic data was released that suggested the US economy grew significantly less than expected in the second quarter � but the weakness was largely driven by businesses. New data out on Tuesday showed that the US consumer remained strong.

What does this mean?

Personal consumption is kind of what it sounds like: spending by people � and it includes everything from your morning latte to your insurance premium. Spending on such things rose 0.4% in June versus the previous month. It was the third straight month of pretty good spending by the average American, which is an important metric since consumer spending accounts for about two-thirds of the US economy. Given that overall economic growth appears to be weaker than expected so far this year, the consumer is becoming even more important.

Why should I care?

The bigger picture: The US economy might not be as bad as Friday�s weak data suggested.
For one, economic measures of the consumer continue to be pretty good (although there is a risk that weakness in other parts of the economy will start dragging down people�s propensity to spend money). Also, the apparent inconsistency in the data has some questioning the accuracy of how the overall economy is measured (here�s the CEO of JPMorgan expressing his scepticism). In sum, despite Friday�s poor data, the situation in America might not be that bad (especially, compared to other countries).


For you personally: The prices of things are increasing only moderately.
One of the main measures of inflation was released as part of Tuesday�s data. It showed inflation (excluding food and energy) as having risen at the same pace that it did in May (1.6% versus one year ago). The fact that the inflation rate is not increasing suggests that the price Americans pay for things (on average) will continue to rise fairly slowly for, at least, the near term. (By the way, inflation is much lower in Europe but perhaps set to increase significantly in the UK).