Payments by U.S. consumers increased $60.4 billion in August, compared with a rise of just $3.5 billion in July, according to a new Commerce Department report.
August personal spending rose $57.5 billion, while debt and interest payments were up $2.9 billion. That compares with the July personal spending increase of $500 million and debt and interest payments of $3 billion, the Commerce Department said.
The consumer spending increase of 0.5 percent is the biggest gain since March, while personal income was up 0.3 percent, Reuters reported.
The biggest exception to the spending boost: the housing sector, where contracts to purchase previously owned U.S. homes fell 1 percent in August, according to a separate report from the National Association of Realtors. The pending home sales index plunged last year after mortgage interest rates jumped, although home sales have been on the rise again since March.
But almost every other kind of consumer spending was up, the Commerce Department report said. Purchases of durable goods rose 1.9 percent, versus a 0.1 percent rise in July. Spending on motor vehicles accounted for roughly half the August spending increase. Spending on nondurable goods jumped 0.3 percent in August, compared with a drop of 0.1 percent in July. And spending on services rose 0.4 percent, versus a decrease of 0.1 percent in July.
The August spending rise came in part from a slight decrease in the savings rate, which reached an 18-month high in July. August personal saving was $705.3 billion in August, down 0.03 percent from $730.5 billion the previous month.
However, private-sector wages and salaries also increased $30.4 billion in August, compared with a $17.4 billion rise in July.
The rise in household spending — which was slightly above what economists predicted — suggests that years of exceptionally low interest rates are finally having the desired effect on economic growth. The numbers are “a further signal that the positive momentum in domestic activity is being sustained,” said Millan Mulraine, an economist at TD Securities. The U.S. economy grew at its fastest pace in 2-1/2 years in the second quarter, according to data released last week.
Inflation was up only 1.5 percent in August from a year earlier, down slightly from July, according to the Commerce Department. Inflation dipped to to 1.2 percent earlier this year, worrying some Fed policy makers about the possibility that inflation is still well below their 2 percent target.