WRAPUP 1-U.S. consumer spending rises as wages boost family income
* Incomes grow 0.4 percent in August, most since Feb
* Inflation shows signs of stabilizing
WASHINGTON, Sept 27 (Reuters) - U.S. household spending rose in August as incomes were buoyed by solid wage gains, signs that momentum could be growing in the U.S. economy despite months of harsh government austerity. American families spent 0.3 percent more last month than the month before, which was in line with the median forecast in a Reuters poll, Commerce Department data showed on Friday. Higher wages drove incomes up 0.4 percent, the biggest gain since February, and a positive sign for growth in the second half of the year. "The pick-up in income growth in August suggests that consumption growth may even accelerate in the fourth quarter," said Paul Ashworth, an economist at Capital Economics in Toronto. The readings might bolster the case for the U.S. Federal Reserve to move forward with winding down a bond-buying stimulus program, although policymakers have expressed concern that political gridlock could trigger a debt default that would deliver a serious blow to the economy. The data also backs the view that tax hikes and federal budget cuts are dragging on the economy less as the year goes on. Washington increased tax rates in January and slashed the federal budget in March.
The data had little impact on sentiment on Wall Street, where focus remained on twin fiscal debates in Congress over funding government operations beyond this month and authorizing an increase in a limit on government borrowing. Lawmakers must raise the debt limit soon or America could begin defaulting on its obligations by the second half of October. Concerns over this pushed prices on U.S. stock index futures lower. Even after taking into account tax bills and price increases, incomes rose in August by the most since March. Indeed, the strength in consumer spending also appears to have stopped a worrisome decline in the inflation rate. The Commerce Department data showed prices other than food and energy rose 1.2 percent in the 12 months through August. That is up a tenth of a point from the prior month, but the reading has held largely steady since April.