Consumer spend more, but their incomes fall (AP)

WASHINGTON ? Consumers spent slightly more last month but earned less for the first time in nearly two years. The new data on spending and incomes suggest Americans tapped their savings to cope with steep gas prices and a weaker economy.

The Commerce Department said Friday that consumer spending rose 0.2 percent in August after a revised 0.7 percent increase in July.

Incomes fell 0.1 percent. That's the poorest showing since a similar 0.1 percent drop in October 2009.

Americans saved less money. The savings rate fell to its lowest level since late 2009.

A decline in income growth could slow the economy, if it causes households to cut back on spending. Consumer spending accounts for 70 percent of economic activity.

The economy grew at an annual rate of just 0.9 percent in the first six months of the year, the slowest growth since the recession officially ended more than two years ago.

Economists expect only slightly better growth in the second half of this year, based on expectations that consumers will spend more.

Some are predicting growth of around 2 percent in the second half of the year. That level of growth would ease recession fears, but it's not enough to lower the unemployment rate, which was 9.2 percent in August.

Consumer confidence stayed weak in September after the economy experienced a number of shocks this summer. Lawmakers fought over raising the nation's borrowing limit, Standard & Poor's downgraded long-term U.S. debt, the stock market fluctuated wildly and Europe's debt crisis intensified.

Employers have pulled back on hiring. In August, they added no new jobs.

Some pressures are easing. Gasoline prices are now roughly $3.46 per gallon. While that is higher than last year, the price is down nearly 52 cents from this year's peak price of $3.98.

The Federal Reserve last week agreed to shift $400 billion of its portfolio of Treasury securities to try to drive down long-term interest rates. It was the Fed's latest unconventional move seeking to give the economy a boost.

Source: http://us.rd.yahoo.com/dailynews/rss/topstories/*http%3A//news.yahoo.com/s/ap/20110930/ap_on_bi_ge/us_consumer_spending

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