Consumers boosted spending 0.3 percent in August

WASHINGTON — U.S. consumers increased their spending slightly last month as their income grew at the fastest pace in six months. The figures point to only modest economic growth in the July-September quarter.

Consumers’ spending on goods and services rose 0.3 percent in August, the Commerce Department said Friday. That’s up from a 0.2 percent gain in July, which was slightly more than the 0.1 percent reported last month.

Income rose 0.4 percent in August, the best gain since February and up from a 0.2 percent July increase. Private wages and salaries rose 0.5 percent, while the government wages and salaries rose 0.2 percent.

The government figures would have been higher if not for forced federal furloughs that reduced wages and salaries by $7.3 billion.

Consumer spending drives 70 percent of economic activity. Many analysts say the increases are not enough to accelerate economic growth in the third quarter from the 2.5 percent annual rate in the April-June quarter.

“With more money coming in, consumers spent a little, just a little, more freely,” said Jennifer Lee, senior economist at BMO Capital Markets.

Paul Ashworth, chief U.S. economist at Capital Economics, predicts the economy is growing at an annual rate of 2 percent to 2.5 percent in the July-September quarter. Still, the pickup in August could signal stronger growth in the final three months of the year.

Other economists are less hopeful. Peter Newland, an economist at Barclays, said that the modest increase did not change Barclay’s forecast for growth at a 1.7 percent rate.

Americans saved some of the extra money they earned last month. The personal savings rate edged up to 4.6 percent of after-tax income, a slight improvement from 4.5 percent in July.

Consumers are benefiting from mild inflation. An inflation gauge tied to consumer spending increased 1.2 percent over the past 12 months, well below the Federal Reserve’s 2 percent target. Some Fed officials have argued that the central bank should not start reducing its support for the economy until inflation has risen closer to the Fed’s target.

A recent spike in interest rates and mixed signals from the job market were key reasons the Fed decided held off last week on reducing its $85-billion-a-month in bond purchases. The Fed also scaled back its economic growth estimate for this year and next.

There are some signs that consumers may be better positioned to step up spending soon.

The number of people seeking unemployment benefits has sunk to its lowest point in six years because few companies are laying anyone off anymore. That has led some economists to predict that employers added 200,000 jobs or more jobs in September — the most since February.

And gas prices are falling again. The average national price for a gallon of regular gas on Thursday was $3.43. That’s 11 cents cheaper than a month ago and the lowest since January.

More in Herald Business Journal

Exec director of Future of Flight in Mukilteo stepping down

A former board president will temporarily lead Snohomish County’s most popular tourism attraction.

Seafood producer Keyport moves corporate HQ to Edmonds

The family business sees the city as business friendly — and able to accommodate expansion.

Peoples, HomeStreet banks bump lowest salaries after tax cut

The banks with Snohomish County branches will raise minimum salaries for employees to $15 an hour.

Amazon opens store with no cashiers, lines or registers

The Seattle store allows shoppers to use a smartphone app to pay for items they want.

Electroimpact cuts Mukilteo staff by 9 percent

“What we’re missing now is a monster anchor project,” the company’s VP said.

Exotic animals find compassionate care in Bothell (video)

At the Center for Bird and Exotic Animal Medicine, vets treat snakes, hedgehogs and even kangaroos.

How can you tell if you are getting good financial advice?

Assume that it’s still the same buyer-beware market that has always existed.

U.S. government proposes new rules for hog slaughter

The plan lets plant workers be in charge of removing unfit hogs, instead of government inspectors.

Glitches slow Boeing, SpaceX plans for human spaceflight

Boeing has an issue with its abort system that may cause the spacecraft to “tumble.”