U.S. consumer spending rose moderately in August, suggesting the economy retained some of its strong momentum from the third quarter, while inflationary pressures continued to ease.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.2% last month, following an unrevised 0.5% increase in July, the U.S. Bureau of Economic Analysis reported Friday. Department of Commerce. Economists surveyed by Reuters estimated an increase of 0.3%.
Consumer spending continues to be supported by still-solid wage gains, even though the labor market has slowed considerably.
Annual revisions to national accounting data released Thursday showed stronger growth in wages and salaries in the second quarter than previously estimated. The savings rate was also higher than previously thought. Rising incomes and savings bode well for consumer spending for the remainder of the year.
There were fears that consumers would dip into their savings to finance the expense. Nervousness in the labor market, with an unemployment rate above 4%, had raised fears of precautionary savings, which would undermine spending.
The Federal Reserve last week cut its benchmark overnight interest rate by 50 basis points to the 4.75%-5% range, the first reduction in borrowing costs since 2020, which the Fed chair said , Jerome Powell, sought to demonstrate the commitment of those responsible for monetary policy to maintaining a low unemployment rate.
Growth estimates for the third quarter are around an annualized rate of 2.9%, with consumer spending expected to match the pace of the April-June quarter. The economy expanded at a rate of 3.0% in the second quarter.
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