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Consumer spending stalls as incomes post slowest growth since winter

Consumer spending stalls as incomes post slowest growth since winter
Shoppers browse the racks at an H&M clothing store on Fifth Avenue in New York on Sept. 27. (Drew Angerer / Getty Images)

Consumer spending barely grew in August after a sharp rise the previous month as incomes rose by the smallest amount since winter, the Commerce Department said Friday.

Analysts had expected Americans to slow their pace of spending following strong 0.4% growth in July. But the growth of less than 0.1% — meaning spending was essentially flat — was well below economists' forecasts of 0.2%.

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Taking inflation into account, consumer spending actually declined slightly in August, the first time that's happened since January.

Consumers cooled their spending because the growth of their incomes slowed.

Personal income increased 0.2% in August, half of the strong 0.4% pace of the previous month.

Consumers also saved more in August. The share of disposable income saved increased by 0.1 percentage point to 5.7%.

The drop in inflation-adjusted spending came in part because inflation increased in August. The price index for personal consumption expenditures — the Federal Reserve’s preferred inflation measure — increased  0.1% in August after being flat the previous month.

For the 12 months ended Aug. 30, prices increased 1%, a stronger annual inflation rate than recorded in July. Excluding volatile food and energy costs, prices increased 1.7% for the 12 months.

The Fed wants to see 2% annual inflation.

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