US consumer spending rises in August; core inflation firms slightly

28 Sep 2015 | Author: | No comments yet »

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

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. Consumer purchases climbed 0.4 percent, matching the gain in July that was larger than previously reported, Commerce Department figures showed Monday. 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. “Today’s number is consistent with a 3 percent consumer spending profile for the third quarter,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC in New York and the best forecaster of household outlays over the past two years, according to data compiled by Bloomberg. “It’s a very nice pace, to be sure.” Projections for spending ranged from gains of 0.2 percent to 0.5 percent.

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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