Consumer Spending in U.S. Rose More Than Forecast in August

28 Sep 2015 | Author: | No comments yet »

Consumer Spending in U.S. Rose More Than Forecast in August.

WASHINGTON—U.S. households increased their spending in August as incomes rose, suggesting that consumers will continue to support the economy despite turbulence in financial markets and slowing overseas growth.Household spending climbed more than forecast in August and incomes also rose as the biggest part of the U.S. economy continued to power past a global slowdown. Personal spending, measuring how much Americans paid for everything from home appliances to health care, rose 0.4% in August from a month earlier, the Commerce Department said on Monday.

Consumer purchases climbed 0.4 percent, matching the gain in July that was larger than previously reported, Commerce Department figures showed Monday. Households slowed their spending during the winter but picked up the pace in the spring, helping GDP accelerate to a 3.9% growth rate during the second quarter of the year. Solid gains in the labor market, combined with cheap gasoline and modestly growing incomes, should continue to boost consumption, which accounts for 70 percent of the economy. “The energy dividend from low oil prices will fall right through to consumers’ purchasing power,” Aneta Markowska, chief U.S. economist at Societe Generale in New York, said before the report. “We’re anticipating a few quarters of strong consumer spending.” Projections for spending ranged from gains of 0.2 percent to 0.5 percent. Monday’s report showed the price index for personal consumption expenditures—the central bank’s preferred inflation gauge—was flat from July and rose only 0.3% from a year earlier. July’s income reading was revised to a 0.5 percent gain, the biggest advance since November and compared with a previously reported 0.4 percent increase.

Stripping out the volatile food and energy components, the price measure rose 0.1 percent from the month before and 1.3 percent in the 12 months ended August. Earlier this month central bankers decided to keep their benchmark interest rate unchanged. “Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term,” the Fed said in a statement.

Even with the global threats, consumers remain optimistic about the domestic economy, according to the University of Michigan’s survey of consumers. While international developments have lowered confidence levels, the data are still indicative of consumption expanding at a 2.9 percent annualized rate, the group said. With cheap oil reducing business investment and a stronger dollar crimping factories, households have had to do the heavy lifting for growth this year.

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