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Consumer spending rebounds, rose 0.8 pct. in July

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WASHINGTON (AP) — Consumer spending grew in July by 0.8 percent,

the largest amount in five months. That followed a decline in June

and helped ease fears that the U.S. economy is on the verge of

another recession.

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Personal incomes increased 0.3 percent last month, the Commerce

Department said. That’s slightly higher than the modest 0.2 percent

in June, the weakest growth in seven months.

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The first look at spending in the second half of the year gave Wall

Street an early lift. Stock futures rose after its release. It

added to positive reports that Hurricane Irene didn’t do as much

damage as feared.

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Consumer spending is important because it accounts for 70 percent

of economic activity.

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Economists said the report was a strong sign that the economy

rebounded in July after anemic growth in the first half of the

year.

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July’s spending and income figures “significantly alter the outlook

for third-quarter GDP growth,” said Paul Dales, a senior U.S.

economist for Capital Economics. Dales said growth for the

July-September quarter is on track for an annual rate of 2.5

percent, up from his previous estimate of 1.5 percent.

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The government on Friday lowered its growth estimate for the

April-June quarter to an annual rate of just 1 percent. Through the

first six months of the year, the economy grew just 0.7 percent –

the weakest in the two years since the recession official

ended.

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A number of reports show the economy improved last month. The

economy added 117,000 net jobs in July, twice the number added in

each of the previous two months. Spending on retail goods rose

faster last month than in any month since March. U.S. automakers

rebounded last month to boost factory production by the most since

the Japan crisis.

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In July, consumer spending rose at a faster pace than income. That

means Americans saved less. The savings rate fell to a four-month

low of 5 percent, down from 5.5 percent in June.

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The increase in spending was led by a 1.9 percent jump in purchases

of durable goods, products such as autos and appliances that are

expected to last at least three years. Spending on non-durable

goods rose 0.7 percent. However, the purchase of services, the

biggest spending category, fell 0.7 percent. Services include

everything from haircuts to airline tickets.

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In a speech Friday, Federal Reserve Chairman Ben Bernanke proposed

no new steps to boost the economy. But he did say the Fed would

expand its September meeting to two days to allow a fuller

discussion.

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Investors hope the Fed will announce another round of Treasury

purchases after that meeting. But economists said interest rates

are already so low that there is little more the Fed can do to

boost the economy.

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