WASHINGTON: US consumers kept a tight rein on spending in August even as incomes rose, government data showed Monday.

A Commerce Department report showed a 0.5 per cent gain in personal income and a flat reading on personal consumer spending.

Weak consumer spending, which accounts for the lion's share of US economic activity, suggests tough sledding for the US economy, which has been battered by a housing meltdown that has led to squeeze on credit.

An inflation index linked to the report known as the personal consumption expenditure index was essentially flat for August. But the core PCE index excluding food and energy, increased 0.2 per cent.

"How stagflationary can a report get?" said John Ryding at RDQ Economics.

"Consumer spending is on track to decline 2.7 per cent in real terms in the third quarter based on the data for July and August, while the Fed's beloved core PCE price inflation measure has risen to 2.6 per cent, which is the highest inflation rate on this measure since June 1993."

- AFP/yt