Consumer spending shows biggest gain in 2 years
Marketwatch - September 28, 2007 8:31 AM ET
WASHINGTON (MarketWatch) - Boosted by good deals on the auto lots and steady prices for consumer goods, U.S. real consumer spending increased 0.6% in August, the fastest growth in more than two years, the Commerce Department reported Friday.
Inflation-adjusted spending on durable goods rose 2.8%, the biggest increase in two years.
Automakers went all out in August to move cars and trucks off the lots. Earlier in the month, the government reported that motor vehicle sales increased 2.8% in August, not adjusted for inflation.
Consumer prices were flat on the month, the government said. Core consumer price inflation, which excludes food and energy prices, rose 0.1% in August, bringing core inflation over the past year down to 1.8%, the lowest since early 2004, and within the Federal Reserve's comfort zone of 1% to 2%.
Consumer prices including inflation have also risen 1.8% in the past year, the lowest inflation in two years.
Personal incomes increased 0.3% in August, the slowest growth since April, held back by weak employment and wage growth. Wages and salaries increased 0.2%. After-tax incomes adjusted for inflation rose 0.4%.
Nominal consumer spending rose 0.4%, higher than the 0.4% gain expected, while incomes came in slightly below expectations. Economists surveyed by MarketWatch were forecasting a 0.4% gain in incomes and a 0.1% rise in the core personal consumption expenditure price index.
Real spending on nondurable goods was flat in August, while spending on services rose 0.6%.
With spending rising faster than incomes, the personal savings rate fell to 0.7% in August from 0.9% in July.
