Posted by John_NorCal on 9/28/07 10:08am
Msg #213623

Consumer spending is up (Another rate cut coming??)

Consumer spending tops forecasts
August gain comes despite mortgage, housing woes; key inflation reading improves.
September 28 2007: 8:45 AM EDT


NEW YORK (CNNMoney.com) -- Consumer spending stayed strong in August, despite the problems in mortgage and real estate markets that some feared would put a brake on Americans' willingness to open their wallets, according to a government report issued Friday.

Spending by consumers rose 0.6 percent in August, an improvement from the 0.4 percent rise in July.

Economists surveyed by Briefing.com had forecast another 0.4 percent rise in August.

The solid gain in spending came even as individuals' incomes rose by only 0.3 percent in August, down from the 0.5 percent rise in July. That was a bit weaker than economists' forecast of a 0.4 percent rise in income in the period.

The Commerce Department report also included a key inflation reading, the so-called core PCE deflator, which measures prices paid by individuals for goods other than food and energy.

The Federal Reserve is believed to want to see that reading post between a 1 and 2 percent increase on a year-over-year basis. The August report showed a 1.8 percent rise on that basis, after a 1.9 percent rise in the previous readings for both June and July.

That would appear to give a green light to the Fed if it should decide it wants to cut interest rates again at its next meeting Oct. 31.