Americans spent more in August than in each of the preceding five months and also earned more, the Commerce Department said Monday, supporting consensus forecasts of broad-based economic growth in the second half of the year and next year.
Personal spending increased 0.5 percent, more than the consensus 0.4 percent increase expected by economists, and personal income after taxes increased 0.3 percent from July, as expected.
“Job gains, and to a lesser extent wage growth, are boosting incomes,” said Gus Faucher, senior economist at PNC Financial Services Group.
A jump in purchases of durable goods like washing machines and cars boosted spending, a sign that more Americans are replacing big-ticket items as they become more confident about the economy and their personal finances. Low interest rates, easing access to credit, and rising home and stock prices are also supporting purchases of lasting products, Faucher said.
The rise in personal spending came with upward revisions in previous months. In July, personal spending unexpectedly declined 0.1 percent.
“The details are sparse at this stage, but we suspect that the 1.9 percent month-over-month increase in real spending on durable goods was largely due to a rise in autos spending and that part of the 0.4 percent month-over-month gain in services spending came from spending on utilities,” said Paul Dales, U.S. economist at Capital Economics, in a note Monday.
Dales also said he expects real income growth to rise in the fourth quarter after increasing an estimated 2.8 percent in the third quarter and 4.4 percent in the second quarter.