Page last updated at 15:21 GMT, Monday, 4 August 2008 16:21 UK

Prices hit US consumer spending

A US shopper
Rising prices have reduced the effectiveness of the stimulus package

Consumer spending in the US slowed in June, official figures have shown, as Americans were hit by the biggest price rises since 1981.

Inflation-adjusted spending fell 0.2% in June, the Commerce Department said.

Its inflation gauge rose 0.8% in the month, which was the biggest increase since February 1981's reading of 1.0%.

On Tuesday the Federal Reserve will announce its latest interest rates move with economists saying that inflation will make the decision tough.

The Fed is expected to keep interest rates unchanged, but there will be much interest in whether its statement expresses concerns about rising prices - which have reduced the impact of the government's $168bn (85bn) stimulus programme.

Factory orders rise

In other economic news, the new orders received by US factories grew by 1.7% in June, which was much higher than had been expected.

One of the biggest contributors was heavy demand for military equipment, which rose by 16.9%.

There was also a 5.2% rise in orders for primary goods such as steel.

The cash value of orders for refined petroleum products were also up, reflecting their increased prices.

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