Consumers shrugged off a rash of bad news to spend more than expected in August, and a key measure of inflation eased to the slowest pace in 3 1/2 years. Construction activity also rose above expectations last month.
The Commerce Department said Friday that spending increased 0.6 percent, the biggest jump in four months.
Separately, the department reported that construction spending posted a surprising 0.2 percent gain in August as strength in non-residential construction offset a continued plunge in home building.
“Consumers were out in force in August even though we had the credit crunch,” said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Inflation is behaving quite well.”
The report’s price gauge tied to spending patterns and excluding food and energy costs, the Federal Reserve’s preferred measure of inflation, increased 0.1 percent in August. It was up 1.8 percent from August 2006, the smallest 12-month gain since February 2004.
