US consumer spending rises as wages boost family income

WASHINGTON (REUTERS) - US household spending rose last month as incomes were buoyed by solid wage gains, signs that momentum could be growing in the US economy despite months of harsh government austerity.

American families spent 0.3 per cent more last month than the month before, Commerce Department data showed on Friday. Higher wages drove incomes up 0.4 per cent, the biggest gain since February, and a positive sign for growth in the second half of the year.

"The pick-up in income growth in August suggests that consumption growth may even accelerate in the fourth quarter," said Mr Paul Ashworth, an economist at Capital Economics in Toronto.

The readings might bolster the case for the US Federal Reserve to move forward with winding down a bond-buying stimulus programme, although policymakers have expressed concern that political gridlock could trigger a debt default that would deliver a serious blow to the economy.

The data also backs the view that tax hikes and federal budget cuts are dragging on the US economy less as the year goes on. Washington increased tax rates in January and slashed the federal budget in March.