Personal income up most since February; consumer spending also rises

WASHINGTON -- Americans' incomes rose the most since February last month, helping increase the pace of consumer spending and providing a positive sign for economic growth this fall.

Personal income increased 0.4% in August compared with an upwardly revised 0.2% the previous month, the Commerce Department said Friday. Consumer spending rose 0.2% in August compared with a 0.1% rise in July.


The income growth was in line with analyst expectations; consumer spending was slightly below forecasts of a 0.3% increase.

Income growth is a key to future economic activity and has been slow during the recovery from the Great Recession.

The monthly data are one of the economic reports the Federal Reserve is watching as it considers when to start reducing its bond-buying stimulus program. The Commerce Department also reported Friday that inflation remained in check, with the so-called core rate at 1.2% over the previous 12 months.

The initial July reading of just a 0.1% increase in personal income triggered alarms about the expected pickup in economic growth in the second half of the year.

The August rebound in income growth raises hope that the strength of the recovery will improve.

Still, although the pace of consumer spending in August was double that of July's, it was modest.

At the same time, the savings rate increased last month.

Americans saved 4.6% of their income in August, compared with 4.5% the previous month. The August savings figure was the most since May, though still historically low.