Consumer Spending Slows Dramatically

Although the odds that the U.S. economy is headed for a recession remain small, there's no doubt that consumer spending slowed dramatically in August.

Personal consumption expenditures increased just a tenth of a percentage point in August, dramatically lower than July's eight-tenths increase and the smallest monthly increase so far in 2006, the U.S. Commerce Department reported on September 28. On an inflation-adjusted basis, spending in August declined a tenth percent.

Consumer spending is a closely watched indicator since it accounts for about two-thirds of all U.S. economic activity.

Personal income grew three times as fast as expenditures in August, rising three-tenths of a percentage point. However, it was the smallest monthly growth of this year.

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