US consumers spent more in August, a positive sign for the economy which appears to have shifted into a higher gear.

The Commerce Department said today consumer spending rose 0.5 per cent last month after being unchanged in July.

The growth in August was just above the median forecast in a poll of a 0.4 percent gain.

Even after adjusting for inflation, spending was 0.5 per cent higher, the biggest gain since March.

Growth in personal income ticked higher to a 0.3 per cent gain, in line with forecasts. Some of the strength in spending came from a decrease in the saving rate, which eased back from a 18-month high in July.

The data reinforces the view that the US economy will finish this year firing on nearly all cylinders, and the dollar pared an earlier decline following the report’s publication.

Most investors are betting the US Federal Reserve could raise interest rates next year to keep inflation in check, though today's data gave little sign of growing price pressures.

The Fed’s preferred gauge of inflation was up 1.5 percent in August from a year earlier, down slightly from the reading in July, the Commerce Department data showed.

A measure of underlying price pressures which strips out food and energy held at 1.5 per cent. That reading had dipped to 1.2 per cent earlier this year. Some policymakers at the US central bank remain concerned that inflation remains stuck well below their 2 per cent target.

Reuters