WASHINGTON, Sept 1 — US consumer spending increased by the most in six months in July as Americans bought more goods and services, but slowing monthly inflation rates cemented expectations that the Federal Reserve would keep interest rates unchanged next month.
Consumer spending, which accounts for more than two-thirds of US economic activity, increased 0.8% last month. Data for June was revised slightly higher to show spending rising 0.6% instead of 0.5% as previously reported. Economists had forecast spending increasing 0.7%. When adjusted for inflation, consumer spending increased 0.6%, also the largest gain since January. The so-called real consumer spending rose 0.4% in June. Last month’s solid increase put real consumer spending on a higher growth path at the start of the third quarter, prompting economists to raise their gross domestic product estimates.
Excluding the volatile food and energy components, the PCE price index gained 0.2%, after climbing by the same margin in the prior month. The so-called core PCE price index increased 4.2% year-on-year in July after rising 4.1% in June. Economists estimated that costs for core services excluding housing, closely watched by policymakers, increased 0.5% after gaining 0.3% in June. That led some to believe the Fed could raise interest rates in November.
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