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Consumer Spending Beats Expectations in June, Allaying Economic Fears

Shoppers ride escalators at the Beverly Center mall in Los Angeles, Calif., November 8, 2013. (David McNew/Retuers)

Consumer spending was robust in June, beating expectations after a disappointing first quarter stoked fears that the U.S. economy might be heading for a decline.

Retail sales increased 0.4 percent in June, surging past economists’ projections of a 0.1 percent increase, according to a Commerce Department report published Tuesday. Purchases of furniture, building materials, and motor vehicles, among other items, increased.

Market expectations that the Federal Reserve will cut interest rates remain unchanged despite the strong report and consumer-spending increases in April and May.

The buoyant numbers assuaged fears that the economy was heading into a downturn after a weak first quarter that included declining business investment and an inventory surplus among some companies. Consumer spending sank during the early months of the year in the aftermath of the record 35-day partial government shutdown that stretched from December through January.

The Congressional Budget Office estimated that the shutdown, which left about 800,000 federal workers without paychecks for five weeks, cost the U.S. economy $3 billion it will likely never recover.

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