U.S. Consumer Spending Likely Rose 0.2% in August on Car Sales

By Bob Willis
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Sept. 29 (Bloomberg) -- Consumer spending in the U.S. probably rose in August as carmakers boosted incentives to shore up sales in the face of rising unemployment and slumping confidence, economists said ahead of a report today.

The 0.2 percent increase in purchases would follow a 0.2 percent rise in July, according to the median forecast of 64 economists surveyed by Bloomberg News. The average gain was 0.3 percent a month during the last official recession, in 2001. Today's report may also show inflation accelerating on higher commodity costs that have since receded.

Demand from consumers is faltering as the boost from tax rebates fades, job losses mount, home equity evaporates and a credit crunch toppled some of the nation's largest financial companies. Steeper discounts at General Motors Corp. stirred some demand for cars, helping pull auto sales from 15-year lows.

``Consumers are under pressure from just about every conceivable angle at this point,'' said Russell Price, a senior economist at H&R Block Financial Advisors in Detroit. ``Spending is likely to turn negative at some point over the next few months.''

The Commerce Department's report is due at 8:30 a.m. in Washington. Spending estimates in the Bloomberg survey ranged from a gain of 0.5 percent to a drop of 0.2 percent.

The survey also projects incomes rose 0.2 percent in August, according to economists' estimates, after dropping 0.7 percent the prior month when the flow of rebate checks dropped off after peaking the prior two months.

Inflation Signs

The income and spending report is also likely to show inflation is eroding American's purchasing power. The price gauge tied to spending patterns probably rose 4.5 percent in the year ended August, holding at the fastest rate in 17 years for a second month, according to the survey median.

The measure that excludes food and energy costs, the one tracked by the Federal Reserve, probably rose 2.4 percent from a year earlier, matching the prior month and the most since February 2007, the survey showed.

Concern over both slower growth and rising prices led Fed policy makers on Sept. 16 to hold the benchmark interest rate at 2 percent.

Fed Chairman Ben S. Bernanke told lawmakers at a hearing last week that the economy faces ``grave threats'' to financial stability and warned the credit crisis is hurting business spending. He added that the outlook for consumer spending is ``sluggish at best.''

Auto Industry Woes

Purchases of big-ticket items remain weak. Sales of autos and light trucks edged up in August to a 13.7 million rate from the prior month's 12.5 million annual pace, which was the lowest since 1993, according to Bloomberg calculations based on industry data. Sales may drop again in coming months as financial market turmoil constrains credit.

``The auto industry is the smallest it's been in years in terms of sales'' and the U.S. economy is ``lackluster,'' General Motor Corp.'s Vice Chairman Bob Lutz said Aug. 28 in Joliet, Illinois. ``Nobody is quite sure when it's going to turn around.''

Economists surveyed by Bloomberg in the first week of September forecast consumer spending in the third quarter will be flat, the weakest since 1991, following a 1.2 percent pace in the second quarter.

Economists forecast overall economic growth of 1.2 percent in the July-to-September period, from 2.8 percent in the second quarter, according to the Bloomberg survey.

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Personal Spending Forecasts   MOM%
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Date of Release              09/29
Observation Period            Aug.
----------------------------------
Median                        0.2%
Average                       0.2%
High Forecast                 0.5%
Low Forecast                 -0.2%
Number of Participants          64
Previous                      0.2%
----------------------------------
4CAST Ltd.                    0.0%
Action Economics              0.2%
Aletti Gestielle SGR          0.3%
Argus Research Corp.         -0.2%
Banc of America Securitie     0.2%
Bank of Tokyo- Mitsubishi     0.4%
Bantleon Bank AG              0.3%
Barclays Capital              0.3%
BBVA                          0.5%
BMO Capital Markets           0.3%
BNP Paribas                   0.1%
Calyon                        0.1%
CIBC World Markets            0.1%
Commerzbank AG                0.2%
Credit Suisse                 0.4%
Daiwa Securities America      0.3%
Danske Bank                   0.2%
DekaBank                      0.2%
Desjardins Group              0.1%
Deutsche Bank Securities      0.2%
Dresdner Kleinwort            0.2%
DZ Bank                       0.2%
First Trust Advisors          0.3%
Fortis                        0.1%
Global Insight                0.1%
H&R Block Financial Advis     0.2%
Helaba                        0.2%
HSBC Markets                  0.1%
IDEAglobal                    0.3%
Informa Global Markets        0.0%
ING Financial Markets         0.2%
Insight Economics             0.3%
Intesa-SanPaulo               0.2%
J.P. Morgan Chase             0.2%
Janney Montgomery Scott L     0.1%
JPMorgan Private Client       0.0%
Landesbank Berlin             0.2%
Landesbank BW                 0.3%
Lehman Brothers               0.3%
Lloyds TSB                    0.2%
Maria Fiorini Ramirez Inc     0.2%
Merk Investments              0.0%
Merrill Lynch                 0.1%
Moody's Economy.com           0.1%
Morgan Stanley & Co.          0.3%
National City Corporation     0.1%
Natixis                       0.2%
Newedge                       0.2%
Nomura Securities Intl.       0.1%
PNC Bank                      0.3%
RBS Greenwich Capital         0.2%
Ried, Thunberg & Co.          0.3%
Schneider Trading Associa     0.0%
Scotia Capital               -0.2%
Societe Generale              0.2%
Stone & McCarthy Research     0.3%
TD Securities                 0.2%
Thomson Financial/IFR         0.0%
University of Maryland        0.2%
Wachovia Corp.                0.1%
Wells Fargo & Co.             0.2%
WestLB AG                     0.2%
Westpac Banking Co.           0.1%
Wrightson Associates          0.3%
==================================

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net