Consumer spending, which accounts for roughly three-quarters of total U.S. economic activity, declined in August by the largest margin in nearly a year as weak income growth and rising inflation took their toll, the Commerce Department reported Friday. Adjusting for inflation, consumer spending dropped by 0.1 percent last month, the first decline since Hurricane Katrina triggered a 0.3 percent fall in September 2005. Incomes stagnated during the same period, rising just 0.3 percent, and inflation excluding food and energy costs rose by a significant 2.5 percent, the department said. After removing inflation, the 0.1 percent decline in spending followed a 0.5 percent rise in July. Much of the slowdown reflected a drop in auto sales in August following a strong July, the department said A cooling housing sector and the falling value of U.S. homes are making many Americans less eager to spend money, analysts said. As a result of more moderate economic activity, the overall economy grew at an annual rate of just 2.6 percent in the April-June quarter, the government said Thursday. The latest consumer spending data would suggest that third quarter growth will be even lower, although the Christmas shopping season at the end of the year should help to strengthen the economy before the end of 2006.
