Consumer spending, which makes up more than two-thirds of the U.S. economy, grew at a 3.3 percent rate, the fastest in a year. That was revised up from the 2.8 percent pace reported in July and accounted for the bulk of the pickup in economic growth in the second quarter.
But stronger consumer spending came at the expense of saving amid sluggish wage gains. The saving rate slipped to 3.7 percent from 3.9 percent in the first quarter. The second-quarter saving rate was previously reported at 3.8 percent.
Households cannot, however, continue to rely on savings indefinitely to fund their consumption. Despite the acceleration in consumer spending, inflation remained benign in the second quarter.
The Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, increased at a 0.9 percent rate as previously reported.
Last quarter’s rise was the slowest in more than two years and followed a 1.8 percent rate of increase in the first quarter. The gross domestic purchases price index, another measure of inflation pressures in the economy, increased at a 0.8 percent rate as reported last month.
Businesses helped to carry the economy in the second quarter, with spending on equipment jumping at a rate of 8.8 percent. That was the fastest in nearly two years and was an upward revision to the 8.2 percent pace reported last month.
It was the third straight quarterly increase. Investment on nonresidential structures increased at a 6.2 percent pace, rather than the previously reported 4.9 percent rate.
That was still a moderation from the January-March period’s brisk 14.8 percent rate and reflected some cooling in spending on mining exploration, wells and shafts.
Inventory investment had a neutral effect on second-quarter GDP as previously reported. Inventories chopped off 1.46 percentage points from output in the first quarter.
Trade added two-tenths of a percentage point to growth instead of the previously reported 0.18 percentage point, marking a second straight quarterly contribution.
Housing was a drag on growth in the last quarter, with investment on home building contracting at a 6.5 percent rate, instead of the previously reported 6.8 percent pace. It was the worst performance in nearly seven years.