US inflation stays low as spending cools
US inflation picked up slightly in August but consumer spending and income growth cooled, suggesting economic growth remained tepid.
The fresh data will supply little added support for the Federal Reserve’s plan to tighten monetary policy with higher interest rates before the end of the year, but should not weaken the argument either, according to analysts.
Consumer spending was flat for the month after rising an average of 0.4 percent each month for the May-July period, mainly due to a long-expected slowdown in automobile purchases.
The slowdown “was always likely once the automakers reported the sharp correction in sales, following their unsustainable strength in July,” said economist Ian Shepherdson, who predicted a pickup in September’s data.
Another reason is that US households have boosted their savings – a short-term damper on economic activity but a development which points to longer-term sustainability.
Personal income gained US$39.3 billion in August, an increase of 0.2pc over July. -