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Consumer spending edges up in July, incomes flat

August 29, 2009|Annys Shin | Shin writes for the Washington Post.

WASHINGTON — The "cash for clunkers" trade-in program, which gave consumers a subsidy to turn in less fuel-efficient vehicles for newer models, boosted consumer spending in July, the Commerce Department reported Friday.

Personal consumption expenditures, adjusted for inflation, rose 0.2%, roughly in line with analysts' forecasts. Motor vehicle and parts purchases more than accounted for the increase in July and accounted for most of the increase in June, the report said.

Cash for clunkers ended Monday. Policymakers are considering a similar program for appliances.

The data indicated that consumers are willing to spend if given the right incentives. The data also suggested that the boost in spending might not be sustainable now that the subsidy is gone.

Households remain under pressure from unemployment and stagnant wages. A separate report Friday showed that consumer sentiment for August edged up from earlier in the month and was higher than analysts had expected. However, the Reuters/University of Michigan Surveys of Consumers said its final consumer sentiment index still hit a four-month low, slipping to 65.7 from 66.0. It had risen to 70.8 in June.

Financial reversals were reported with equal frequency across all income subgroups, as was the expectation that joblessness would continue to increase, the report said.

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