August Consumer Spending Grows at Fastest Pace Since March; Annual Core Inflation Holds Steady

10:24 AM EDT, 09/26/2025 (MT Newswires) -- US consumer spending accelerated in August at the fastest pace since March, while the Federal Reserve's preferred inflation metric held steady on an annual basis, government data showed Friday.

Personal consumption expenditures increased 0.6% last month, the Bureau of Economic Analysis reported. Spending rose 0.5% in July, which was the pace of growth expected for August in a Bloomberg poll.

"Consumer spending rose a touch more than anticipated in August, and combined with upward revisions to past months, consumer spending has rebounded vigorously from the sharp slowdown seen in the spring," Oxford Economics Deputy Chief Economist Michael Pearce said in remarks emailed to MT Newswires. "Our tracking estimate for real consumption growth in (the third quarter) is 3.1% annualized, well above our September forecast for growth of 1.5%."

The US economy grew in the second quarter at a faster pace than previously projected amid an upward revision to consumer spending, the Bureau of Economic Analysis said Thursday.

The annual headline PCE price index advanced 2.7% last month, compared with 2.6% growth in July, while the metric accelerated sequentially to 0.3% from 0.2%, according to the BEA. Both prints were in line with market estimates.

The Fed's preferred core measure, which excludes food and energy, held steady at 2.9% in August. Sequentially, the core measure remained unchanged at 0.2%. Both measures met consensus expectations.

Earlier this week, Fed Chair Jerome Powell said policymakers face a "challenging situation," with near-term risks to inflation tilted to the upside and those to employment leaning downside.

"The PCE price indexes show inflation creeping higher as tariffs push up a range of goods prices," Pearce said Friday. "We estimate around two thirds of the burden of tariffs have been passed through to consumers, though the range of new sectoral tariffs announced overnight mean further price pressures are likely on the way."

In separate social media posts on Thursday, President Donald Trump announced that the US will impose tariffs of 25% on heavy trucks and 50% on kitchen cabinets and bathroom vanities, effective Oct. 1. Additionally, the US will charge 100% levies on branded or patented pharmaceutical products.

Goods spending climbed 0.8% in August following a 0.6% gain the month prior, as growth in outlays on nondurables helped counter a slowdown in the durable category, BEA data showed Friday. Services spending growth remained unchanged at 0.5%.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.