Rebound in US consumer spending

Car and retail sales boosted consumer spending figures

US consumer spending rebounded in July, a sign the economy may be emerging from an early summer decline.

Consumer spending rose 0.8% last month, boosted by car and retail sales.

But incomes have risen at a more modest pace than expected, posting a 0.1% increase, the weakest advance since November 2002.

Consumer spending accounts for two-thirds of US economic activity and this rise could indicate that the economy will expand in the third quarter.

Higher growth?

July's rise in consumer spending follows a revised 0.2% decline in June. Originally, consumer spending was reported to have declined by 0.7% in June, the Commerce Department said.

Analysts now hope that the rebound in spending will lay the foundation for higher growth in the second half of the year.

The economy grew at a rate of 2.8% in the second quarter of the year, triggering fears that the economy was entering a soft patch. Estimates for growth in the July-to-September period range between 3% and 4%.

The next key economic indicator is the August jobs report, due for publication on Friday.

Presidential hopeful

Monday's data comes as the Republican party faithful meet in New York to formally nominate President George W Bush for the November presidential poll.

The health of the economy - in particular the prospects for job creation, with 1.1 million jobs lost since President Bush took office - is one of the key electoral battlegrounds.

The US Federal Reserve raised interest rates by a quarter of a percentage point to 1.5% earlier this month, in an effort to curtail inflationary pressures without obstructing economic growth.

The widely-anticipated decision followed June's increase to 1.25%, the first upward move for four years.

The US consumer price index was unchanged last month, evidence that US inflation is well under control, analysts said.