US consumer spending cools, inflation stays near Fed goal

US consumer spending rose in August at the slowest pace in six months, reflecting moderation from more robust readings on the biggest part of the economy. Inflation remained near the Federal Reserve’s target pace.

Purchases, which account for about 70% of the economy, rose 0.3% from the prior month, slowing from 0.4% the prior month, Commerce Department figures showed on Friday, and matching the median forecast in Bloomberg’s survey.

Incomes rose 0.3%, less than projected.

The softer readings may signal that consumers aren’t as eager to splurge even amid a solid labor market, lower taxes, and improving finances that boosted second-quarter consumption. A trade war that’s widened to include tariffs on consumer goods from China has the potential to raise prices and affect demand, after signs that the tensions are hurting exports and business investment.

Inflation-adjusted spending rose 0.2%, also the weakest since February.

The Fed’s preferred measure of inflation remains near the central bank’s 2% goal, while it’s on target excluding food and energy. Policy makers have penciled in further interest-rate hikes over the next year, expecting to keep inflation in check.

The data on Friday showed the Fed’s preferred inflation gauge - tied to consumption - rose 0.1% from the previous month and climbed 2.2% from a year earlier.

Excluding food and energy, so-called core prices were little changed, falling short of economist projections for a 0.1% rise. The core index, seen as a more reliable gauge of underlying inflation, rose 2% from a year earlier.

The economy expanded at a 4.2% annualised rate in the second quarter, the fastest since 2014, with consumption rising at a 3.8% pace, revised data showed on Thursday.

Wages and salaries rose 0.5%, the most since January, the August report showed.

Real disposable income, or earnings adjusted for taxes and inflation, increased 0.2% for a second month.