WASHINGTON – Consumer spending, pending home sales and factory orders were all weaker than projected in June, showing the recovery lost momentum heading into the second half of the year as employment stagnates.

Household purchases, which account for about 70 percent of the economy, were unchanged from May, according to figures Tuesday from the Commerce Department. Contracts to buy existing houses unexpectedly dropped for a second month and factory bookings fell more than twice as much as economists estimated, other reports showed.

“The consumer is less willing to spend,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia, who projected purchases would stall. “Soft labor markets are likely to remain so through 2013. There’s not a lot of opportunity for income growth.”

The median estimate of 76 economists surveyed by Bloomberg News called for a 0.1 percent gain in spending. Projections ranged from a decrease of 0.3 percent to a 0.3 percent gain.

Incomes also stagnated in June, failing to increase for the first time since September, compared with a 0.2 percent gain projected by the survey median. Wages and salaries in June fell 0.1 percent.

The savings rate for American households increased to 6.4 percent, the highest level since June 2009, to $725.9 billion.

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“Consumers are still a bit cautious,” said Scott Brown, chief economist at Raymond James Associates Inc. in St. Petersburg, Fla. “The biggest driver for spending is going to be jobs. You need stronger economic growth to generate job growth.”

The jobless rate climbed to 9.6 percent last month from 9.5 percent in June, according to economists anticipating a Labor Department report Aug. 6. Payrolls probably dropped by 60,000 workers, reflecting a drop in temporary government employees as the census wound down, the survey also showed.

A lack of jobs is one reason Americans aren’t buying houses. The number of contracts to purchase previously owned houses fell 2.6 percent in June, indicating demand kept unraveling after the expiration of a homebuyer tax credit.

Manufacturing, which led the world’s biggest economy out of the economic slump, is also cooling. Orders placed with factories declined 1.2 percent, more than double the 0.5 percent drop projected by a median forecast of economists.

Smaller increases in consumer spending and inventories may offset gains in business investment and growing exports, leading to a more sustainable factory expansion.

“A downshift in the manufacturing boom is under way,” said Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pa. “This shouldn’t be taken as a signal of widespread weakening. Businesses still have expansion in their sights and will provide the fuel for growth.”

 


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