U.S. consumer spending rose at its fastest pace in nearly 8 years in August, advancing for a fourth straight month, according to a government report on Thursday that pointed to a rebound in spending in the third quarter.
The Commerce Department said spending jumped 1.3 percent, the largest gain since October 2001, after a revised 0.3 percent increase in July, previously reported as up 0.2 percent.
That compared to market expectations for a 1.1 percent gain in spending, which normally accounts for over two-thirds of U.S. economic activity. Adjusted for inflation, spending rose 0.9 percent in August, also the largest increase since October 2001, after rising 0.2 percent.
There are concerns that weak domestic consumption could stall the economy's nascent recovery from its worst recession in 70 years. While analysts agree the economy's healing has started, many worry that high unemployment and the resulting pressure on incomes might translate into a lethargic growth.
Government data on Wednesday showed spending dropped at a 0.9 percent annual rate in the second quarter after rising 0.6 percent in the January-March period.
Personal income rose 0.2 percent in August after rising 0.2 percent in July, the Commerce Department said. This was a touch above market expectations for a 0.1 percent rise.
Real disposable income inched up 0.1 percent in August. Savings declined for a third straight month. Savings slipped to an annual rate of $324.1 billion, with the saving rate easing to 3 percent from 4 percent in July. A measure of inflation closely watched by the Federal Reserve, the year-on-year personal consumption expenditures index excluding food and energy slowed to 1.3 percent after a 1.4 percent increase in July.
(Reporting by Lucia Mutikani; Editing by Neil Stempleman)