U.S. Spending Is Up 0.5% as Economy Stabilizes
By THE ASSOCIATED PRESS
WASHINGTON — Americans increased their spending by a significant amount in August, offering welcome evidence that the economy is on solid footing heading into the final quarter of the year.
Consumer spending in August rose 0.5 percent from the previous month after showing no gain in July, the Commerce Department reported on Monday. It was the best result since spending also expanded 0.5 percent in June.
Helped by higher wages and salaries, personal income rose a modest 0.3 percent in August, slightly faster than a 0.2 percent July increase.
The acceleration in consumer spending added to signs that the economy is sustaining strength in the current July-September quarter. Consumer spending accounts for roughly 70 percent of economic activity, and the lackluster showing in July had raised concerns about whether the economy would retain the momentum it built in the spring after a harsh winter. Still, analysts noted that the growth in consumer spending was the strongest in six months after the effects of inflation were removed.
“The August rebound on the spending front was broad based and driven by better-than-expected back-to-school spending and surging auto sales,” said Chris G. Christopher Jr., director of consumer economics at IHS Global Insight.
The housing market, however, showed a bit of weakness in August, suggesting that real estate sales may remain sluggish over the next few months.
Inflation was well contained during August, with an inflation measure tracked closely by the Federal Reserve showing no change after a 0.1 percent July increase. Over the past 12 months, this measure of inflation is up just 1.5 percent, well below the Fed’s 2 percent target.
About half of the spending growth came from a big jump in August car sales. That helped push durable goods purchases up 1.8 percent in August after no change in July.