Consumers increased spending by 0.4% in August, a strong month of car buying and back-to-school purchases at retailers. Personal incomes rose by 0.3% last month, the Commerce Department said Monday. Economists polled by MarketWatch had forecast a seasonally adjusted 0.3% increase in spending and a 0.4% gain in income. Since spending grew faster than income, the amount of money individuals save fell a tick to 4.6% from 4.7%. Consumer outlays have risen a modest 3.5% in the past year, though spending looks healthier if gasoline is stripped out. Gas is much cheaper now compared to a year ago. Also, inflation as gauged by the PCE price index was unchanged in August. The PCE index has risen 0.3% in the past 12 months, offering little evidence that inflation is about to surge close to the Federal Reserve's 2% target. The core PCE index that excludes food and energy, meanwhile, edged up 0.1%, and it's 1.3% higher over the past year.
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