Consumers spent a bit more in August than the previous month, a sign the economy is holding up even as inflation lifts prices for food, rent, and other essentials.
Americans boosted their spending at stores and for services, such as haircuts, by 0.4 percent in August, after it fell 0.2 percent in July, the Department of Commerce said Friday. Yet much of that increase reflected higher prices, with an inflation gauge closely monitored by the Federal Reserve rising 0.3 percent in August, the government’s report showed.
Americans are also saving less in order to keep up with higher prices. The US saving rate was just 3.5 percent in August, far below pre-pandemic levels of about 8 percent, Friday’s report said.
There have been other signs of consumer weakness recently, with used car seller Carmax reporting sharply lower sales in the three months ending in August. The company attributed the decline to “affordability challenges” for consumers amid high inflation and rising interest rates.
Compared with a year ago, prices jumped 6.2 percent, down from a 6.4 percent annual gain in July but not far from June’s four-decade high of 7 percent. The figure is lower than the more widely-known consumer price index, released earlier this month, which reported an 8.3 percent price gain in August from a year earlier.
The two indexes differ for several reasons. For example, the consumer price index puts much greater weight on rents and housing costs, which have been rising steadily, than the measure released Friday, known as the price index for personal consumption expenditures.
Excluding the volatile food and energy categories, core prices rose 0.6 percent, much faster than July’s flat reading. They increased 4.9 percent from a year earlier, up from July’s figure of 4.6 percent.