Americans opened their wallets wider in August even as surveys showed consumer confidence at some of its lowest levels in years, according to data released Wednesday by the Commerce Department’s Bureau of Economic Analysis.
Personal consumption expenditures rose 0.9 percent, or $190.8 billion, following a revised 0.1 percent increase in July. After adjusting for inflation, spending climbed 0.6 percent, up from a 0.1 percent gain the month before.
The spending surge stands in sharp contrast to how households say they feel about the economy. The Conference Board’s consumer-confidence index fell to 81.9 in September, its lowest reading since 2014. The University of Michigan’s sentiment index dropped to 48.1 in September from 51.7 in August, a level 15 percent below where it stood in January. Survey respondents cited high prices, gasoline costs, and a souring jobs and business outlook as sources of concern—worries that have not translated into reduced spending.
Spending on goods rose $114.1 billion, while spending on services increased $76.7 billion. The biggest contributors were other nondurable goods, gasoline and other energy products, food services and accommodations, motor vehicles and parts, and recreational goods. Recreation services were the lone weak spot, falling $10.3 billion.
Incomes Lag Behind Spending
Personal income rose 0.2 percent, or $66.6 billion, coming in below what economists had forecast, driven by gains in private wages and government social benefits. Disposable personal income—income left after taxes—increased 0.3 percent, but after accounting for inflation, real disposable income was flat.
Because households spent more relative to what they earned, the personal saving rate fell to 4.1 percent from a revised 4.6 percent in July. Economists generally read that kind of pattern as a sign that consumers feel secure enough about their jobs and future income to draw down savings rather than build them up.
Inflation Still Running Hot
Prices continued to climb, a reminder that inflation remains stubborn and that gasoline costs tied to the Iran war have taken a toll on household budgets. The personal-consumption expenditures price index—the inflation gauge the Federal Reserve watches most closely—rose 0.3 percent in August after a 0.1 percent increase in July. Excluding food and energy, core prices rose 0.2 percent.
Measured against a year earlier, the PCE index was up 3.4 percent, matching July’s annual pace, while the core index rose 3.0 percent year-over-year. Both figures remain above the Fed’s 2 percent target, though they came in slightly below what forecasters had expected.
Wednesday’s release also included the government’s annual update to the national accounts, revising personal income and spending figures back to January 2021 and lowering some previously reported inflation readings.
Consumer spending makes up roughly two-thirds of U.S. economic output, meaning August’s rebound after a sluggish July suggests household demand remains firm for now—even as rising prices, elevated borrowing costs, and a darkening outlook on jobs continue to weigh on how Americans say they feel about the economy.
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