US spend lifts in August

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US consumers boosted spending in August as wages rebounded from a decline in July.

Consumer spending rose 0.3 per cent in August, while personal income jumped 0.4 per cent, the strongest month on month growth since February, the US Commerce Department reported on Friday.

Both numbers were better than expected, with analysts having forecast a 0.2 per cent rise in spending and a 0.3 per cent rise in income.

Wages and salaries, the largest component of personal income, rose 0.4 per cent after falling 0.3 per cent in July.

The wage growth left Americans with more spending cash in their wallets, and after-tax disposable income increased 0.5 per cent in August after a 0.3 per cent rise in July.

Inflation remained tame, with the prices of goods and services paid by consumers edging up 0.1 per cent for the month, the same increase as in July.

Excluding food and energy, so-called core personal consumption expenditures prices rose 0.2 per cent, double the rate in the prior month.

Year over year, core PCE prices were up 1.2 per cent in August, slightly higher than in July, but still well below the Federal Reserve’s 2.0 per cent target for price stability.

The Fed has said any start to reducing its $US85 billion ($A91 billion)-a-month bond purchases would depend on improving economic data.

Jim O’Sullivan, chief US economist at High Frequency Economics, said that further slowing in inflation “would be unwelcome”, but he pointed out there has been no further slowing since April.

“The data are unlikely to stop Fed officials from at least starting the tapering process in the next few months,” he said.


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