Consumer spending rises at fastest pace in four months

Washington, D.C. A report released Monday by the Commerce Department found that consumer spending inched up 0.4% in July after three lackluster months.

Spending dipped 0.1% in April, rose 0.1% in May and was flat in June.

Personal incomes were up 0.2% in July, less than expected but an improvement over June, when incomes had not risen at all. The July spending gain was the highest since a 0.5% rise in March, according to the report.

But the concern is that demand could taper off in the second half of this year if unemployment remains near double digits, said the Commerce Department.

With spending rising, the personal savings rate slowed to 5.9% of after-tax income, down from 6.2% in June, the highest in nearly a year. Even with the July decline, the savings rate is nearly three times higher than it was before the recession began in December 2007.

The gain in spending reflected a 1% jump in demand for durable goods. About half of that increase came from a jump in auto sales, the government said.

Economists had expected a rebound in spending for July. Still, the economy is growing too slowly to support sustained job growth and some fear it could fall back into a recession. Economic growth slowed to 1.6% in the April-to-June quarter, the government reported Friday. That was revised down from the initial estimate of 2.4%.