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The Boston Globe

Business

Consumer spending rises in September

Consumer spending is considered important because it drives nearly 70 percent of US economic activity.

Elise Amendola/Associated Press/File 2012

Consumer spending is considered important because it drives nearly 70 percent of US economic activity.

WASHINGTON — Americans increased their spending in September at twice the rate that their income grew, a sign of confidence in the economy. Still, consumers made up the difference by saving less for a third straight month, a troubling trend.

The Commerce Department said Monday that consumer spending increased 0.8 percent in September from August. That followed a 0.5 percent gain in August and was the best showing since February.

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Personal income rose 0.4 percent, an improvement from a slight 0.1 percent gain in August and the best gain since March. However, after adjusting for inflation and taxes, income was flat in September. That followed a 0.3 percent decline in August.

Consumer spending is important because it drives nearly 70 percent of economic activity.

A pickup in consumer spending helped lift economic growth in the July-September quarter to a 2 percent annual rate.

Paul Dales, senior US economist at Capital Economics, said weak income growth would likely hold back spending in the coming months. Consumers can only cut their savings by so much, he cautioned. And if Congress fails to reach a budget deal by the end of the year, taxes will rise in January. That could also dampen consumer spending.

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