Consumer spending rose as inflation held firm in August

Inflation held firm in August as consumer spending rebounded sharply from a July decline, according to data released Friday by the Commerce Department.

The personal consumption expenditures (PCE) index, the Federal Reserve’s preferred gauge of consumer price growth, rose 0.4 percent in August and 0.3 percent without food and energy prices, the same rates as in July. 

Annual inflation ticked higher in August, rising 0.1 percent from July to 4.3 percent, while annual inflation without food or energy prices stayed even at 3.6 percent. 

The rate of consumer price increases has appeared to slow from a sharp rise this summer, but inflation has remained at decade-plus highs longer than many economists, including White House and Federal Reserve officials, had anticipated.

A combination of severe shipping backlogs, supply chain snarls, hiring troubles in key industries and the stifling impact of the delta variant have all kept upward pressure on consumer prices, with little clarity into when they will ease.

Consumer spending, however, snapped back strongly from a 0.1 percent decline in July, rising 0.8 percent in August and 0.4 percent when adjusted for inflation. 

Spending on both goods and services rose as an increase in purchases of food and household goods offset a decline in auto and auto parts purchases, according to the Commerce Department.