U.S. consumer spending rose at the slowest rate in nine months, the U.S. Commerce Department reported Tuesday, with high gasoline prices and the continuing crisis in the housing market contributing to people's reluctance to spend. The new figures showed consumer spending up by just 0.1 percent. The figure is a sharp fall from May's 0.6 percent rise and was the smallest increase since last September. Incomes, a predictor for future spending, rose by 0.4 percent in June for the second month in a row. But the Commerce Department figures were accompanied by a steep increase in consumer confidence. The Conference Board said that its Consumer Confidence Index, jumped to 112.6 in July from a reading of 105.3 in June. The figure, which comes from a survey taken before last week's stock market falls, marks a six-year high. Meanwhile, the Commerce Department also released construction spending figures, showing a 0.3 percent drop in June. The figures appear to be restrained mostly by cutbacks in home building and projects by the federal government. It was the weakest showing since a 0.6 percent drop in January and fell shorts of analysts' forecasts for a modest 0.2 percent rise. The poor construction figure came despite the fact that private projects for commercial structures have climbed to all-time highs. Spending by state and local governments on construction projects also rose to record highs. The construction weakness is a further indication of consequences from the housing market slump. Private builders cut spending on residential construction by 0.7 percent in June, marking the 16th straight month in which this spending declined. Against this backdrop, Federal Reserve Chairman Ben Bernanke is expected to hold a key interest rate steady at 5.25 percent when they meet next week. This rate has stayed at that level for more than a year. With income growth outpacing spending, Americans' personal savings rate - savings as a percentage of after-tax income - rose. The savings rate rose to 0.6 percent in June, up from 0.4 percent in May.
