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WASHINGTON – Americans continued to spend in August as their incomes rose, although the pace of spending seems to be slowing down from very strong growth this spring.
Personal consumption spending, a measure of household spending on everything from mayonnaise to furniture, rose 0.3% in August from the previous month, the Commerce Department said Friday. This was the smallest monthly change in spending since February.
Personal income, reflecting Americans' pre-tax earnings from wages and other sources, including investment, rose 0.3% in August.
"While consumer spending has been weak – the smallest increase in six months – the recent trend is towards a solid increase in consumer spending, and consumer confidence suggests good spending in the future" in a noteworthy note. ; analysts.
Personal income, reflecting Americans' pre-tax earnings from wages and other sources, including investment, rose 0.3% in August. This slightly outpaced the 0.4% increase in earnings expected by economists surveyed by the Wall Street Journal, even though the 0.3% increase in spending was in line with their forecasts.
Spending has been strong in recent months, after a slow start to the year. Spending in June and July increased 0.4%.
The report showed that inflationary pressures were modest. The Consumer Price Index, the Federal Reserve's preferred measure of inflation, rose 0.1% in August and 2.2% from the previous year.
Excluding the volatile costs of food and energy, prices remained stable in August compared to July and increased by 2% over the previous year. Economists were expecting basic year-on-year inflation to rise 1.9%.
The Fed is aiming for 2% year-on-year inflation and raising short-term interest rates to avoid overheating the economy. Officials voted this week to increase their federal funds benchmark rate by a quarter of a percentage point to reach a range of between 2% and 2.25%.
Officials have announced a further 25% rate increase in 2018. Most Fed officials expect the central bank to raise its rates at least three times next year and once again in 2020.
Consumer spending accounts for more than two-thirds of US economic output, and Friday's report still suggests that the third quarter should end this weekend on a solid foundation, with high consumer confidence and low unemployment continuing to support household expenditure. .
"Household spending and business investment are growing rapidly and overall growth prospects remain favorable," Fed Chairman Jerome Powell said Wednesday at a news conference.
Many economists expect growth of 3% or more in the current quarter, largely because of growth forecasts for household spending.
The latest expenditure data show that the increase in spending in August was driven by spending on unsustainable goods, such as food and clothing. Expenditures on durable goods – expensive items such as cars and appliances – fell 0.1% after rising 0.5% in July.
Spending on services rose 0.4% for the second consecutive month, and the Commerce Department said spending on health care was the main cause of the increase.
Americans continue to save a decent share of their incomes: the savings rate was 6.6%, the same as in July but down from 7.4% six months ago.
Write to Harriet Torry at [email protected]
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