US consumer spending pauses, but rising confidence offers hope

WASHINGTON, Aug 30 (Reuters) :  US consumer spending fell in July for the first time in six months, but confidence among households hit a seven-year high in August, suggesting the retrenchment would be temporary.
Another report on Friday showed a sharp acceleration in factory activity in the Midwest this month, a further sign the economy remains on solid ground.
"The weakness in spending will quickly subside this fall as consumer confidence is supported by record highs in the stock market, rising housing prices and improving labor market conditions," said Michael Woolfolk, global markets strategist at BNY Mellon in New York.
Consumer spending, which accounts for more than two-thirds of US economic activity dipped 0.1 per cent last month after rising 0.4 per cent in June, the Commerce Department said. Economists had expected a 0.2 per cent gain.
When adjusted for inflation, it fell 0.2 per cent.
Spending was weighed down in part by a decline in automobile purchases and a weather-related drop in demand for utilities.
The weakness in spending prompted some economists to lower their forecasts for third-quarter economic growth. Goldman Sachs cut is projection by two-tenths of a per centage point to a 3.1 per cent annual rate.