U.S. consumer spending increased steadily in August, supporting expectations of solid economic growth in the third quarter, while a measure of underlying inflation remained at the Federal Reserve’s 2% target for a fourth straight month, Reuters reports.
The Commerce Department announced this morning that consumer spending—which accounts for more than two-thirds of U.S. economic activity—rose 0.3% last month after an unrevised 0.4% gain in July. Spending last month was driven by outlays on health care, which offset a drop in motor vehicle purchases.
August’s increase in consumer spending was in line with economists’ expectations. When adjusted for inflation, consumer spending rose 0.2% in August after climbing 0.3% in July.
The report came on the heels of data on Thursday showing a decline in orders for key capital goods in August and a further widening of the goods trade deficit, which prompted economists to downgrade their gross domestic product estimates for the third quarter to as low as a 2.8% annualized rate.
The economy grew at a 4.2% pace in the second quarter, powered by robust consumer spending as well as farmers front-loading soybean exports to China before Beijing’s retaliatory tariffs came into effect in early July.
