Washington, DC, United States (4E) – American consumers were more cautious with their spending in August, a sign that the slow growth environment will likely continue.
Consumer spending rose just 0.2 percent, the slowest pace in four months and comes after an upwardly revised 0.4 percent increase in July, according to a Commerce Department report released Friday in Washington. The figure compares with the median forecast of 0.5 percent gain by economists surveyed by Bloomberg News.
The increase was primarily driven by the rise in auto sales, which is considered to be volatile and have been rebounding as households buy new cars after an extended delay. Excluding sales in motor vehicles, retail sales increased 0.1 percent, which is an indication of general weakness for discretionary spending.
Increased payroll taxes, slow job creation and restrained rise in income are holding back consumer spending, which account for about 70 percent of the nation’s economy. Friday’s report is one of the last reports to be released before Federal Reserve policy makers meet next week, in which they will decide whether to scale back record monetary stimulus.
Another potential problem revealed by the August retail-sales report was the 0.9 percent fall in building material purchases, a sign of slowdown in the construction activity. Higher interest rates have threatened to put the brakes on the housing industry revival that has helped drive growth.