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Business Times - 01 Oct 2009

US personal spending in August up 1.3%

WASHINGTON - US 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 per cent, the largest gain since October 2001, after a revised 0.3 per cent increase in July, previously reported as up 0.2 per cent.

That compared to market expectations for a 1.1 per cent gain in spending, which normally accounts for over two-thirds of US economic activity. Adjusted for inflation, spending rose 0.9 per cent in August, also the largest increase since October 2001, after rising 0.2 per cent.

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 per cent annual rate in the second quarter after rising 0.6 per cent in the January-March period.

Personal income rose 0.2 per cent in August after rising 0.2 per cent in July, the Commerce Department said. This was a touch above market expectations for a 0.1 per cent rise.

Real disposable income inched up 0.1 per cent in August.

Savings declined for a third straight month. Savings slipped to an annual rate of US$324.1 billion, with the saving rate easing to 3 per cent from 4 per cent 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 per cent after a 1.4 per cent increase in July. -- REUTERS

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