U.S. consumer spending rises moderately in August, signaling continued economic momentum

Consumer spending in the U.S. increased by 0.2% in August, indicating that the economy retains some of its strong third-quarter momentum. Supported by steady wage gains, spending continues to grow despite labor market slowdowns, with inflationary pressures easing and savings rates improving.

Moderate rise in spending reflects economic momentum, with wage gains and higher savings supporting consumer confidence.

Consumer spending rises by 0.2% in August, supported by wage growth, easing inflation, and higher savings, signaling steady economic momentum.

consumer spending, U.S. economy, August spending, wage growth, inflation, savings rate

Consumer spending in the United States increased moderately in August, suggesting that the economy maintained 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 by 0.2% last month following an unrevised 0.5% increase in July, as reported by the Bureau of Economic Analysis of the Commerce Department on Friday. Economists polled by Reuters had estimated a 0.3% rise.

Consumer spending remains supported by still solid wage gains, despite a significant slowdown in the labor market.

Annual revisions of national accounting data released on Thursday indicated higher growth in wages and salaries in the second quarter than previously estimated. The savings rate was also greater than initially thought. The increase in income and savings bodes well for consumer spending for the remainder of the year. There had been concerns that consumers would dip into their savings to finance spending. Nervousness in the labor market, with an unemployment rate above 4%, had raised fears of precautionary savings that could undermine spending.

Last week, the Federal Reserve cut its benchmark overnight interest rate by 50 basis points to the 4.75%-5% range, marking the first reduction in credit costs since 2020. According to Fed Chair Jerome Powell, this move aimed to demonstrate the monetary policymakers' commitment to maintaining a low unemployment rate.

Growth estimates for the third quarter stand at an annualized rate of around 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.