Stocks are off to a hesitant start this morning after Wall Street was swept with the latest economic reports. First, the Commerce Department noted that consumer spending increased 0.6% to mark its fastest growth rate in 2 years during the month of August. Economists were expecting a 0.4% gain. Real spending on nondurable goods stayed flat for the month, but spending on services climbed 0.6%. Durable-goods spending climbed 2.8%, the largest such increase in 2 years. Motor vehicle sales also rose 2.8%, as many automakers offered deals and incentives to move inventory off their lots.
Spending was likely boosted by a 0.1% decline in consumer prices during August. Durable-goods prices dropped 0.4%, and nondurable-goods prices fell 0.5%. Prices for services edged 0.2% higher. The healthy consumer-spending data for the month of August should offer some comfort to those who are fearing an imminent recession, as consumers failed to rein in spending amid a shaky economic picture.
The rise in consumer spending comes even as personal incomes marked their slowest growth since April, notching a gain of just 0.3%. Economists were predicting a rise to 0.4%. Wages and salaries rose 0.2%; after-tax, inflation-adjusted incomes increased 0.4%. As spending outpaced incomes, the personal savings rate declined from July's reading of 0.9% to 0.7% for August.
Finally, core consumer price inflation (excluding food and energy prices) rose only 0.1% in August, in line with expectations. During the past year, core inflation has risen 1.8%, within the Federal Reserve's unofficial comfort zone of 1% to 2% growth. It's the lowest increase since the start of 2004. Including inflation, consumer prices have also notched a 1.8% gain during the past year, the lowest figure in 2 years.