US Income Rises Boosts Consumer Spending Optimism

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.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza