Rising U.S. Consumer Spending Keeps Economy Afloat Amid Inflation Concerns

In August, U.S. consumer spending increased more than anticipated, driven by vacations, dining out, and service expenses. This spending boost maintained economic momentum despite inflation concerns. However, labor market challenges and trade policy uncertainties persist, with higher-income households benefiting more than lower-income ones from current economic conditions.

U.S. consumer spending rose more than expected in August, providing a firm foundation for economic growth despite concerns about rising inflation. The Commerce Department reported that spending increased by 0.6% last month, driven largely by vacationing households and increased expenditures on services such as dining and travel.

The persistent momentum in consumer activity supports a resilient economy, although labor market struggles and trade policy uncertainties continue to cast shadows. Despite these hurdles, high-income households have seen their wealth grow thanks to robust stock markets and elevated home prices, while lower-income groups face the brunt of rising costs.

Economists caution that spending may slow by year-end amidst rising prices and ongoing labor market sluggishness. Meanwhile, new tariffs announced by the Trump administration heighten inflation risks, potentially impacting consumer behaviors further if businesses pass on these costs.

(With inputs from agencies.)