U.S. consumer spending increased for a fourth straight month in July amid strong demand for automobiles, pointing to a pickup in economic growth that could allow the Federal Reserve to raise interest rates this year.
The Commerce Department said on Monday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.3 percent last month after an upwardly revised 0.5 percent gain in June.
July's increase was in line with economists' expectations. Spending was previously reported to have risen 0.4 percent in June. When adjusted for inflation, consumer spending also gained 0.3 percent in July after advancing 0.4 percent in June.
Consumer spending appears to have retained some of its momentum from the second quarter, when it grew at a 4.4 percent annual rate, the fastest in nearly two years. That jump helped to mitigate some of the impact of a sharp inventory drop and prolonged business investment downturn.
The economy grew at a lackluster 1.1 percent growth rate in the second quarter.
July's consumer spending data added to reports on the goods trade deficit, industrial production, durable goods orders and residential construction that have pointed to an acceleration in economic growth early in the third quarter.
The Atlanta Fed is currently estimating third-quarter GDP growth rising at a 3.4 percent annual pace.
Consumer spending is being driven by a tightening labor market, which is steadily lifting wages. Rising home values and stock market prices, which are boosting household wealth, are also supporting consumption.