Consumer spending beats forecast in Aug

WASHINGTON: Consumer spending in the US rose more than forecast in August, suggesting Americans are as yet undeterred by a softening labour market and higher borrowing costs. The 0.6% rise in spending was the biggest in four months and followed a 0.4% increase in July, the Commerce Department said on Friday in Washington. The Federal Reserve’s preferred measure of inflation cooled, while the National Association of Purchasing Management-Chicago said business activity unexpectedly picked up.

Purchases of autos and furniture surprised most economists, signalling that the economy may be able to keep expanding this year even as confidence takes a hit from the jump in credit expenses during August. Smaller price increases give Fed policymakers room to cut interest rates again should a deepening housing slump threaten a broader slowdown.

“The overall data point to an economy that is weathering the credit crisis quite well,” said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi UFJ in New York, who correctly forecast the gain in spending. “So far, the turbulence in the credit markets and the housing markets has not spread over to the broader economy. ”The National Association of Purchasing Management-Chicago’s index of business activity rose to 54.2 in September, from 53.8 the previous month