U.S. consumer spending fell in August for the first time in seven months while inflation showed signs of accelerating, mixed signals that could keep the Federal Reserve cautious about raising interest rates.
As Reuters reports, the Commerce Department says today that consumer spending, which accounts for more than two-thirds of U.S. economic activity, fell 0.1% last month after accounting for inflation.
Analysts polled by Reuters had expected a 0.1% gain.
“Consumers took a breather in August,” says Chris Christopher of IHS Global Insight.
Fed Chair Janet Yellen said last week she expected the U.S. central bank would raise rates once later this year to keep the economy from eventually overheating.
Prices for fed funds futures suggest investors see almost no chance of a hike at the Fed’s next policy meeting in early November and roughly even odds of an increase at its mid-December meeting, according to CME Group.
The dollar was little changed against a basket of currencies while U.S. stock prices were trading higher.
Consumer spending, which has been robust in recent months, partially offset the drag from weak business investment and falling inventories in the second quarter when the economy expanded at a lackluster 1.4% annual rate.
Economists say overall economic growth could still accelerate in the current quarter even with August’s slight decline in consumer spending.
