U.S. Consumer Spending Slows, Inflation Accelerates

Source: Bloomberg

Aug. 29 (Bloomberg) -- Spending by U.S. consumers slowed in July as the impact of the tax rebates faded and a pickup in inflation eroded Americans' buying power.

The 0.2 percent rise in purchases matched forecasts and followed a 0.6 percent increase in June, the Commerce Department said today in Washington. Prices rose by the most in 17 years.

Today's figures underscore economists' projections for U.S. economic growth to slow from the 3.3 percent annual pace in the second quarter that the government reported yesterday. Americans, faced with rising unemployment, soaring food and fuel costs and falling home values, are cutting back on big-ticket items like automobiles and furniture.

``We are looking for a clear slowdown in the economy,'' said Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts, who accurately forecast the gain in spending. ``Inflation has been eating into spending power.''



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