Americans boosted their spending in August even though their income barely grew, new figures show.
Much of the spending increase went to pay higher petrol prices, which may have forced consumers to cut back elsewhere.
The Commerce Department said today that consumer spending rose 0.5% in August from July.
It was the biggest jump since February and, the increase was driven by a 1.7% surge in purchases of nondurable goods. That largely reflected a sharp rise in gas prices during the month.
Spending on durable goods rose 0.3%, helped by gains in car sales. Spending on services rose just 0.2%. Income rose just 0.1% in August, reflecting the weak job growth.
Taking into account inflation, after-tax incomes actually fell 0.3% in August - the weakest performance since November. Consumer spending drives nearly 70% of economic activity.
High unemployment and weak wage growth have kept Americans from spending more freely, which has held back growth.
The economy grew at an annual rate of 1.3% in the three months from April to June, the government said earlier this week. That is down from the 2% growth rate in the January-March quarter and far too weak to lower the unemployment rate, which was 8.1% in August.
Earlier this month, the government released a mixed report on retail spending showing that consumers are feeling pinched by higher petrol prices. Consumers spent 0.9% more at retail businesses in August from July. But excluding the impact of petrol prices and a sizeable increase in car sales, retail sales rose just 0.1%.
The retail sales report showed Americans cut back on clothing and electronics and at general merchandise outlets. Petrol prices saw big increases in July and August, but have since leveled off.
Some positive signs indicate that spending could pick up and a measure of consumer confidence jumped this month to its highest level since February. Steady gains in home prices, along with record-low mortgage rates, have helped fuel a modest recovery in the housing market.
A report yesterday offered some hope that the job market will strengthen. Weekly applications for unemployment benefits plunged 26,000 to a seasonally adjusted 359,000 - the lowest level in two months.
Still, most economists expect only modest hiring gains when the government releases the September employment report next week. The forecast is that employers added roughly 100,000 jobs, about the same as in August.
