U.S. Personal Income Growth Matches Estimates But Spending Flat

(RTTNews) - While the Commerce Department released a report on Friday showing an uptick in U.S. personal income in the month of August, the report said personal spending was little changed during the month.

The report said personal income edged up by 0.2 percent in August after climbing by 0.4 percent in July. The modest increase in income matched economist estimates.

Disposable personal income, or personal income less personal current taxes, also rose by 0.2 percent in August following a 0.4 percent increase in July.

Meanwhile, the Commerce Department said personal spending was virtually unchanged in August after rising by an upwardly revised 0.4 percent in July.

Economists had been expecting spending to rise by 0.2 percent compared to the 0.3 percent growth originally reported for the previous month.

Real spending, which is adjusted to remove price changes, edged down by 0.1 percent in August following a 0.3 percent increase in July.

Personal saving as a percentage of disposable personal income subsequently inched up to 5.7 percent in August from 5.6 percent in July.

Despite the uptick, Steve Murphy, U.S. economist at Capital Economics, said, "The savings rate has still fallen sharply since earlier this year, which isn't overly encouraging for real spending in the second half of the year."

A reading on inflation said to be preferred by the Federal Reserve showed that core consumer prices rose by 0.2 percent in August after inching up by 0.1 percent in the two previous months. The increase matched expectations.

The annual rate of growth in core consumer prices accelerated to 1.7 percent in August from 1.6 percent in July, showing the fastest growth since a matching increase in February.

"There is little reason to think core inflation will rise much further in the months ahead, however, which suggests that the Fed will likely hold on until December before raising interest rates," said Murphy.