Consumer Spending Increases as Inflation Stays in Check

by: Roy Mehta

The Commerce Department reported real consumer spending increased 0.6% in August, the largest growth in two years. The inflation-adjusted spending on durable goods went up 2.8%, also the biggest growth in two years. "That is good news for those worried about a recession," said Peter Morici, a professor at the University of Maryland. Consumer prices dropped 0.1%, as price for durable goods fell 0.4%. Core consumer price inflation, which the Fed likes to see between 1%- 2%, increased .1%, as expected, to 1.8%. "Inflation may head higher from here but for now the Fed has the green light to cut interest rates" at the next Fed meeting in October, said Sam Bullard, an economist for Wachovia.

Sources: MarketWatch, Bloomberg
Commentary: Complete Consumer Capitulation?Think Housing's Bad? You Ain't Seen Nothing Yet
Stocks/ETFs to watch: SPY, DIA

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