US consumer spending, inflation rise moderately in August

WASHINGTON: US consumer spending increased slightly less than expected in August, suggesting some moderation in economic growth in the third quarter, while the annual rise in prices was the smallest in just over 3-1/2 years.

A solid pace of economic growth this quarter, however, remains in the cards as other data from the Commerce Department on Friday showed the goods trade deficit narrowed by the most in nearly two years last month.

Economists did not see the spending and inflation data as weak enough to compel the Federal Reserve to deliver another 50 basis points interest rate cut in November as hoped by investors.

“All things considered, this month’s report does not nudge the Fed in the direction of another forceful 50 basis points cut in November,” said Olu Sonola, head of US economic research at Fitch Ratings. “Two 25 basis points cuts still seem more likely in November and December.”

Consumer spending, which accounts for more than two-thirds of US economic activity, rose 0.2 per cent last month after an unrevised 0.5 per cent gain in July, the Commerce Department’s Bureau of Economic Analysis said. Economists polled by Reuters had forecast consumer spending climbing 0.3 per cent.

Spending was concentrated in services, with outlays on housing as well as financial services and insurance topping the list. There were also increases in spending on healthcare, transportation and recreation services. Consumers also boosted spending at bars and restaurants and stayed at hotels and motels. Goods spending was, however, weighed down by a decline in motor vehicles and parts purchases. Receipts at service stations also dropped amid cheaper gasoline.