Consumer spending is good news for US

The Commerce Department said yesterday that spending increased 0.4 per cent, the largest gain since March, after being unchanged in June.

"On the real wage side, you had a good bump – that's a sign that income is recovering from the recession. On the spending side, the quarter is off to a solid start," said John Canally, an economist at LPL Financial in Boston.

US stock index futures edged up after the data, and Treasury debt prices were steady at higher levels.

The income and spending report was a relief after a raft of weak data for July that had fuelled fears economic growth might continue to slow during in the third quarter.

Last Friday, the government lowered second-quarter gross domestic product growth estimates to a 1.6 per cent annual rate from 2.4 per cent.

Consumer spending, which normally accounts for 70 per cent of US economic activity, is being dampened by stubbornly high unemployment.

Friday's GDP report showed spending increased at 2 per cent rate in the second quarter, up from an earlier estimate of 1.6 per cent.

The Commerce Department said that spending adjusted for inflation, increased 0.2 per cent last month after edging up 0.1 per cent in June. Real spending on goods rebounded 0.4 per cent, while expenditure on services increased 0.2 per cent.

Personal income increased 0.2 per cent last month after being unchanged in June.

Wages and salaries rose at a $22bn annual rate during July after shrinking at an $8bn rate in June.