Moderate Uptick in U.S. Consumer Spending Highlights Economic Momentum

U.S. consumer spending rose moderately in August by 0.2%, suggesting persistent economic momentum. The gain was bolstered by solid wage growth, despite a cooling labor market. Additionally, inflation pressures eased, aligning with Federal Reserve targets. Future policy rate cuts remain a possibility.

U.S. consumer spending increased moderately in August, suggesting continued economic momentum in the third quarter as inflation pressures eased. The Bureau of Economic Analysis reported a 0.2% rise in spending last month, following a 0.5% gain in July. Economists had anticipated a 0.3% increase.

Strong wage gains continued to support consumer spending despite a slowing labor market. Revised national account data published on Thursday showed higher wages and salaries for the second quarter, along with an increased saving rate. These factors bode well for consumer spending through the end of the year.

Concerns that consumers were using savings to fund spending persisted, while a rising unemployment rate above 4% indicated potential precautionary saving. The Federal Reserve recently cut its benchmark interest rate to support low unemployment, marking the first reduction since 2020. Growth estimates for the third quarter are around a 2.9% annualized rate, keeping pace with the second quarter's 3.0% growth. The personal consumption expenditures (PCE) price index rose 0.1% in August, in line with inflation targets.

(With inputs from agencies.)