American consumer spending is rising faster than expected, what does this mean for Bitcoin?

The American consumer spending rose faster in August than analysts had foreseen. According to new figures from the Bureau of Economic Analysis (BEA), consumption increased by 0.6 percent, where economists counted on 0.5 percent. The US economy continues to perform solidly, despite a cooling labor market and rising inflation.

Households with higher incomes remain the engine

According to Reuters news agency, the growth of spending is mainly supported by households with higher incomes, which benefit from a strong stock market and rising house prices. The total power of American households reached a record high of 176.3 trillion dollars in the second quarter.

Lower incomes, on the other hand, are increasingly busy due to higher prices for goods that are affected by import rates. In addition, support via the federal food utility will soon be reduced.

According to economists, the greatest risk for consumption lies in a possible correction of the stock and housing market. “Asset effects have become more powerful for consumption. This is positive as long as shares and house prices rise, but a risk as soon as they falter,” said Ryan Sweet, chief economist at Oxford Economics.

Inflation is moderate, Fed lowers interest

The PCE price index, an important inflation measure for the Federal Reserve in forming their policy, rose by 0.3 percent in August compared to the month before. On an annual basis, inflation amounted to 2.7 percent. The core-PCE, which ignores food and energy, remained stable at 2.9 percent.

The Federal Reserve decided last week to lower the policy interest by 25 basic points to a bandwidth of 4.00 to 4.25 percent. FED chairman Jerome Powell warned that the risks to the labor market are increasing, while inflation pressure will remain high for the time being.

The new figures give a mixed image. The most likely scenario is that the FED will remain careful in October: either again makes a small reduction, or temporarily pauses to get the inflation development sharper. For the time being, however, there is a good chance that interest will also be reduced by 25 percent in October. The CME Watch Tool considers the chance of this 87.5 percent.

Strong consumer spending and a solid US economy generally ensure higher risk appetite for investors. In combination with the interest rate reduction of the FED, this can support the demand for risky assets, such as Bitcoin (BTC) and Ethereum (ETH). Shortly after the publication of the figures, BTC recorded an increase of around 0.5 percent and ETH of 2 percent. In the meantime, the market corrects light again, which shows that investors still remain careful.