Personal income rises in August, boosting consumption

A customer counts cash at an Apple store in New York.
Victor J. Blue | Bloomberg | Getty Images
A customer counts cash at an Apple store in New York.

Rising incomes helped American consumers spend more in August, a positive sign for the U.S. economy which appears to be shifting into a higher gear.

The Commerce Department said on Monday consumer spending rose 0.5 percent last month after being unchanged in July. The growth in August was just above the median forecast in a Reuters poll of a 0.4 percent gain.

Spending was 0.5 percent higher even after adjusting for inflation. Some of the strength in spending came from a decrease in the personal saving rate, which slipped to 5.4 percent from 5.6 percent.

Personal income rose 0.3 percent following a 0.2 percent rise the month before, in line with forecasts.

The data reinforces the view that the U.S. economy will finish this year firing on nearly all cylinders and that the U.S. Federal Reserve could raise interest rates next year to keep inflation in check.

The Fed's preferred gauge of inflation was up 1.5 percent in August from a year earlier, according to the Commerce Department report. That was down slightly from a month earlier. A measure of underlying price pressures which strips out food and energy held at 1.5 percent and has been trending higher this year as the economy has strengthened. The Fed has a 2 percent inflation target.

Data on Friday showed the U.S. economy grew at its fastest pace in 2-1/2 years in the second quarter with all sectors contributing to the jump in output.