US consumer spending rises despite stubborn inflation

In August, US personal spending rose 0.4% in real terms, marking the third consecutive increase and confirming consumers as the main driver of the economy. The PCE index, the Federal Reserve’s preferred gauge of inflation, rose 0.3% on the month and 2.7% year over year; the core measure held steady at 2.9%, well above the Fed’s 2% target.

Spending on goods climbed 0.7%, boosted by discretionary purchases, while services posted more moderate growth. Risks remain: the labor market shows signs of cooling, wages are rising at a slower pace, real disposable income barely advanced, and the saving rate dropped to 4.6%, the lowest this year.

New tariffs pushed by President Trump could keep inflation elevated, pressuring corporate margins. Meanwhile, markets reacted positively, with stock futures higher and Treasury yields lower.