U.S. consumer spending accelerated in August amide a surge in COVID-19 cases, even as soaring demand and snarled supply chains kept inflation high.
Consumer spending rose 0.8% in August, up from a decline of 0.1% in July. Income rose by a smaller 0.2%, the Commerce Department reported Friday. That suggests consumers dug into their savings to fuel more spending on items like clothes and groceries, and to spend more online, even as the delta variant caused them to pull back on traveling and eating out.
Consumer prices increased 0.4% in August from July, the same increase as the previous month. In the past year, inflation rose 4.3%, up slightly from the previous month and the highest in more than three decades.
Supply shortages of everything from computer chips to furniture to paint and chemicals have driven up prices as the economy's rebound from the pandemic recession caught many companies flat-footed.
Federal Reserve Chair Jerome Powell said Thursday that supply chain disruptions, such as jammed ports on the West Coast and factory shutdowns in Asia amid COVID spikes, have lasted longer than the Fed expected. Keeping prices stable is one of the Fed's mandates, along with seeking maximum employment.
Still, Powell said he expected supply chain problems to start improving next year, which would start to push inflation lower in the first half of 2022.
There are early signs that spending picked up further in September, as new COVID cases have started to wane. Spending on airline tickets increased in late September and total credit-card spending rose in mid-September from a month earlier, according to a Bank of America report.
