Americans shrugged off a rash of bad news to spend more than expected in August while a key measure of inflation eased to the slowest pace in 3 1/2 years. Construction activity also rose above expectations, according to AP. The Commerce Department reported Friday that consumer spending rose by 0.6 percent in August, the best showing in four months and better than the 0.4 percent increase that had been expected. Incomes rose by 0.3 percent, slightly lower than had been expected. A closely watched gauge of inflation was up just 1.8 percent in August, compared to the same period a year ago, the smallest increase since a similar rise in February 2004. In another report, construction spending posted a surprising 0.2 percent gain in August as strength in non-residential construction offset a continued plunge in home building. Analysts had been forecasting that overall construction spending would fall by 0.2 percent. The Commerce Department said the increase pushed total spending to a seasonally adjusted annual rate of $1.166 trillion (¤820 billion) and reflected a 2.3 percent rise in spending on office buildings, shopping centers and other non-residential projects, the biggest increase in this category in six months. Spending on home building fell by 1.5 percent, the 18th straight drop in this area, with more weakness expected in coming months as builders scramble to cut back production in the face of slumping sales and a record number of unsold homes.
