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Gauge of US consumer spending rises in August

The cost of living in the US dropped in December, led by a slump in commodities that's roiling global markets.

[WASHINGTON] US consumer spending appeared to grow at a fairly healthy pace in August, pointing to solid domestic demand that could persuade a cautious Federal Reserve to hike interest rates on Thursday.

The Commerce Department said on Tuesday retail sales excluding automobiles, gasoline, building materials and food services increased 0.4 per cent after an upwardly revised 0.6 per cent increase in July.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Core retail sales were previously reported to have increased 0.3 per cent in July.

August's increase was in line with economists' expectations. The retail sales report was the latest indication of sturdy economic momentum and suggested the recent stock market sell-off had little impact on consumer spending.

Signs of sustained strength in the economy could encourage the Fed to raise its benchmark overnight interest rate from near zero. The US central bank's policy-setting committee meets on Wednesday and Thursday against the backdrop of a tightening labour market, low inflation and slowing global growth.

Overall retail sales rose 0.2 per cent last month as strong gains in auto sales were offset by a 1.8 per cent drop in the value of sales at service stations due to a decline in gasoline prices.

Retail sales increased by an upwardly revised 0.7 per cent in July. Economists polled by Reuters had forecast retail sales increasing 0.3 per cent in August after a previously reported 0.6 per cent rise in July.

Receipts at auto dealerships rose 0.7 per cent after rising 1.3 per cent in July. Sales at clothing stores rose 0.4 per cent. Receipts at building materials and garden equipment stores fell 1.8 per cent and sales at furniture stores declined 0.9 per cent.

There were increases in sales at online retailers, restaurants and bars, sporting goods and hobby stores, and electronics and appliance outlets.