Weak income curbs consumer spending (Reuters)

WASHINGTON (Reuters) ? Incomes fell for the first time in nearly two years in August and consumers dug into their savings to keep spending, according to a government report that showed the impact of the weak jobs market.

The Commerce Department said on Friday spending rose 0.2 percent, in line with economists' expectations, after increasing 0.7 percent in July. When adjusted for inflation, however, spending was unchanged after rising 0.4 percent in July.

Consumer spending accounts for about 70 percent of U.S. economic activity.

Income slipped 0.1 percent, the first decline since October 2009, with private wages and salaries dropping $12.2 billion after increasing $23.8 billion in July.

Economists had expected income to edge up 0.1 percent.

"What you're basically getting is a scene where consumers are losing momentum, they're losing momentum on income and as a result of that they're slowing down on spending," said Steven Ricchiuto, U.S. chief economist at Mizuho Securities in New York.

Employment growth ground to a halt in August, and the jobless rate remains at a lofty 9.1 percent.

U.S. stock index futures held losses after the data, while bonds slightly extended gains.

Consumer spending growth slowed sharply to a 0.7 percent annual pace in the second quarter after advancing 2.1 percent in the first three months of the year.

Overall economic growth rose at a 1.3 percent rate in the second quarter after expanding only 0.4 percent in the January-March period.

Last month, real spending on goods fell 0.2 percent, while services ticked up 0.1 percent.

Disposable income was unchanged for the first time since September, but when adjusted for inflation fell 0.3 percent, the largest drop since October 2009.

With real disposable income weak, savings fell to an annual rate of $519.3 billion, the smallest since December 2009, from $550.5 billion in July. The savings rate dropped to 4.5 percent, also the lowest since December 2009.

The report showed a moderation in inflation pressures on a monthly basis. The personal consumption expenditures price (PCE) index rose 0.2 percent after increasing 0.4 percent in July.

Compared to August last year, the index was up 2.9 percent, the largest increase since October 2008, after advancing 2.8 percent in July.

The core PCE index -- excluding food and energy - rose 0.1 percent after gaining 0.2 percent the prior month.

The core index, which is closely watched by Federal Reserve officials, increased 1.6 percent in the 12 months through August after rising by the same margin in July.

The Federal Reserve would like to see it close to 2 percent.

(Reporting by Lucia Mutikani; Additional reporting by Emily Flitter in New York; Editing by Andrea Ricci)

Source: http://us.rd.yahoo.com/dailynews/rss/business/*http%3A//news.yahoo.com/s/nm/20110930/bs_nm/us_usa_economy

byu arizona diamondbacks arizona diamondbacks skylab skylab all my children moneyball