Americans step up spending, but home market weakens

Mon Sep 29, 2014 10:57am EDT
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By Jason Lange

WASHINGTON (Reuters) - U.S. consumer spending accelerated in August, the government said on Monday, a positive sign for an economy that appears to be firing on nearly all cylinders.

The housing sector remains an exception, however, with a separate report showing Americans signed fewer contracts in August to purchase previously owned homes.

Nevertheless, the rise in household spending offered the latest suggestion that years of exceptionally low interest rates have finally pushed the economy into a higher gear.

Consumer spending rose 0.5 percent last month after being unchanged in July, the Commerce Department said. The growth in August was just above the median forecast in a Reuters poll of economists.

Millan Mulraine, an economist at TD Securities in New York called the data "a further signal that the positive momentum in domestic activity is being sustained."

Even after adjusting for inflation, spending was 0.5 percent higher, the biggest gain since March. Growth in personal income ticked up 0.3 percent, in line with forecasts.

Some of the strength in spending came from a decrease in the saving rate, which eased back from a 1-1/2-year high in July.

On Wall Street, housing shares fell even more than the broader stock indexes, which were down sharply as investors focused attention on civil unrest in Hong Kong.   Continued...

A woman shops with her daughter at a Walmart Supercenter in Rogers, Arkansas June 6, 2013. REUTERS/Rick Wilking