WASHINGTON — Consumers spent slightly more in August than they did the month before, a sign the economy is holding up even as inflation drives up prices for food, rent and other essentials.
Americans increased their spending on stores and services such as haircuts by 0.4% in August, after they fell 0.2% in July, the Commerce Department said on Friday. The government report also showed that an inflation gauge closely monitored by the Federal Reserve rose 0.3% last month, faster than July.
The figures suggest the economy is showing some resilience despite sharply rising interest rates, wild stock market swings and high inflation. On Thursday the government confirmed that the economy contracted in the first six months of the year.
Still, there were signs that rising prices are hurting buyers. Consumer spending, adjusted for inflation, increased at an annual rate of 2% in the April-June quarter. However, data for July and August indicate spending is on track to slow to about 0.5% annual growth in the July-September quarter, the economists said.
Compared with a year ago, prices rose 6.2%, down from a 6.4% annual gain in July. The figure is lower than the better-known Consumer Price Index, released earlier this month, which reported an 8.3% price increase in August from a year earlier.
The two indices differ for several reasons. For example, the consumer price index puts much more weight on rents and housing costs, which have been rising steadily, than the measure released on Friday, known as the price index for personal consumption expenditures.
Excluding volatile food and energy categories, core prices rose 0.6%, much faster than July’s flat reading. They were up 4.9% from a year earlier, up from July’s figure of 4.6%.
Adjusted for inflation, consumer spending rose 0.1% last month, after falling slightly in July.
Inflation figures in Friday’s report echoed those released earlier this month, with core prices rising faster than headline inflation. Falling gasoline prices have lowered overall inflation, while stubbornly high costs for housing, cars and services such as health care and haircuts have pushed up basic prices.
Even adjusted for inflation, consumer spending rose 0.1% last month, after falling slightly in July.
Friday’s report also showed personal income rose 0.3% in August for the second month in a row. Adjusted for price increases, disposable income, what is left over after taxes, rose 0.1%, after a strong 0.5% gain in July. Those revenue gains will help drive spending.
But over a longer time frame, earnings lag behind inflation. In the April-June quarter, disposable income adjusted for inflation fell 1.5% at an annual rate.
The Federal Reserve is trying to rein in inflation with its fastest series of interest rate hikes in four decades. It has brought its benchmark short-term rate to a range of 3% to 3.25%, the highest since early 2008, from almost zero in March.
Fed Chairman Jerome Powell and other officials have repeatedly stressed the Fed’s determination to cut prices, even if its rate hikes result in layoffs and a higher unemployment rate.
The Fed intends its interest rate increases to decrease borrowing and spending, which in turn should reduce inflationary pressures in the economy.
Inflation has skyrocketed globally, contributing to economic and financial turmoil in the UK, Europe and a host of developing countries from Turkey to Argentina.
Also on Friday, the 19 countries that use the euro reported that inflation soared 10% from a year earlier as natural gas and electricity prices soared. European countries are struggling with an energy crisis following the Russian invasion of Ukraine, as Russia has cut its natural gas supplies to the European Union.