Consumer Spending Climbed in August on Income Gain
Consumer spending in the U.S. rebounded in August as further job gains encouraged households to loosen their purse strings.
Purchases increased 0.5% last month after little change in July, the Commerce Department reported. The median forecast of economists in a Bloomberg survey called for a 0.4% gain. Incomes increased 0.3%.
Employers are cutting back on dismissals and adding to headcounts, helping underpin sentiment and sustaining the purchases that make up almost 70% of the economy.
“The consumer looks to be in a fairly healthy position,” said Robert Stein, deputy chief economist at First Trust Portfolios. “The labor market is the key behind the income growth that we’re seeing.”
Forecasts for spending in the Bloomberg survey ranged from increases of 0.2% to 0.6% after a previously reported July decline of 0.1%.
The gain in incomes matched the Bloomberg survey median and followed a 0.2% increase a month earlier.
The consumption data showed that after adjusting consumer spending for inflation, which generates the figures used to calculate gross domestic product, purchases increased 0.5% last month, the most since March, after a 0.1% drop in July.
Spending on durable goods, including automobiles, increased 1.9% after adjusting for inflation, the most in five months, following a 0.1% gain. Purchases of non-durable goods, which include gasoline and clothing, rose 0.3%.
Vehicle purchases remain a source of strength for the economy. Sales of cars and light trucks rose to a 17.5 million annualized rate in August, the highest since January 2006, from a 16.4 million pace a month earlier, according to data from Ward’s Automotive Group.
Household outlays on services increased 0.4% after adjusting for inflation. In addition to health care, the category also includes utilities, tourism, legal help and personal care items such as haircuts. This typically makes it difficult for the government to estimate accurately in the preliminary report.
Disposable income, or the money left over after taxes, rose 0.3% in August after adjusting for inflation. It increased 0.1% in the prior month and was up 2.7% from August 2013.
The saving rate fell to 5.4% last month from 5.6% in July. Wages and salaries increased 0.4%, the most in three months.
The core price measure, which excludes fuel and food, rose 0.1% in August from the prior month and was up 1.5% from a year ago.
