Consumer Spending Rises As Americans Save Less, Slightly Beating Forecast

The Commerce Department said on Monday consumer spending rose 0.5 percent last month after being unchanged in July. The growth in August was slightly higher than forecast in a Reuters poll of a 0.4 percent gain.

Even after adjusting for inflation, spending was 0.5 percent higher, which is the biggest increase measured since March of this year. Growth in personal income also increased to a 0.3 percent gain, meeting economists’ forecasts. However, unfortunately much of the strength in spending came from a decrease in the saving rate, which pulled back from a 1-1/2-year high in July.

The impact of the Fed’s bond-buying program is negative on the ability of average, working Americans to save, as the interest rates in savings return zero to little.

Still, the new reports suggests the U.S. economy will finish this year stronger than the last, and the dollar has at least for now stopped its free-fall in the wage of the report.

Most investors expect the Federal Reserve may raise interest rates next year to keep inflation in check, though Monday’s data gave little sign of growing price pressures.

The Fed’s preferred gauge of inflation was up 1.5 percent in August from a year earlier, down slightly from the reading in July, while a measure of underlying price pressures that exclude food and energy remains unchanged at 1.5 percent.

Data on Friday showed the U.S. economy grew at its fastest pace in 2-1/2 years in the second quarter with all sectors showing positive signs. But concerns over lacking consumer spending, which contributes to the vast majority of gross domestic product, were growing.

Now that the data show signs of strong consumer spending during that period, optimism is growing.