WASHINGTON -- Americans boosted spending in August even though their income barely grew.
But much of the increase went to pay higher gas prices, which may have forced consumers to cut back elsewhere.
Commerce Department says consumer spending rose 0.5% in August from
July, the biggest jump since February. In July, spending rose 0.4%.
rose just 0.1% in August, the same puny gain as in July, reflecting the
weak job market. Taking into account inflation, after-tax incomes
actually fell 0.3% in August, the poorest performance since November.
spending increase in August was led by a 1.7% surge in purchases of
non-durable goods, reflecting the sharp rise in gas prices.
Spending on durable goods rose 0.3%, helped by gains in auto sales. Spending on services rose just 0.2%.
spending drives nearly 70% of economic activity. High unemployment and
weak wage growth have kept Americans from spending more freely, which
has held back growth.
The economy grew at an annual rate of 1.3%
in the April-June quarter, the government reported Tuesday. That's down
from the 2% growth rate in the January-March quarter and far too weak to
lower the unemployment rate, which was 8.1% in August.
this month, the government released a mixed report on retail spending
showing that consumers are feeling pinched by higher gas
prices.Consumers spent 0.9% more at retail businesses in August from
But excluding the impact of gas prices and a sizable
increase in auto sales, retail sales rose just 0.1%. The retail sales
report showed Americans cut back on clothing and electronics and at
general merchandise outlets.
Gas prices rose more than 50 cents per gallon in July and August, but have since leveled off.
positive signs indicate that spending could pick up. A measure of
consumer confidence jumped this month to its highest level since
Steady gains in home prices, along with record-low mortgage rates, have helped fuel a modest recovery in the housing market.
report Thursday offered some hope that the job market will strengthen.
Weekly applications for unemployment benefits plunged 26,000 to a
seasonally adjusted 359,000. That's the lowest level in two months.
most economists expect only modest hiring gains when the government
releases the September employment report next Friday.
consensus forecast is that employers added roughly 100,000 jobs, about
the same as in August. Monthly job creation of at least 200,000 over
time is needed to lower the unemployment rate.