U.S. consumer spending barely rose and inflation was tame in July, offering a cautionary note on the economy as the Federal Reserve weighs cutting back its massive bond-buying program.
Spending, which accounts for more than two-thirds of U.S. economic activity, will likely struggle to regain momentum as other data on Friday showed consumer sentiment fell this month.
The reports added to a raft of data that have suggested a loss of steam in the economy early in the third quarter.
Consumer spending ticked up 0.1 percent, restrained by weak outlays on utilities, the Commerce Department said. Spending, which had increased 0.6 percent in June, was also held back last month by tepid income growth.
Economists polled by Reuters had expected consumer spending to gain 0.3 percent last month.
Separately, the Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment slipped to 82.1 in August from 85.1 in July as households worried about higher interest rates and slower economic growth.
Long-term interest rates have risen by more than a full percentage point over the last three months on the view that the Fed will start scaling back as soon as next month its hefty support for the economy.
The unchanged reading in the so-called real consumer spending, which goes into the calculation of gross domestic product, added to data on residential construction, durable goods orders, industrial production and new home sales that have suggested the economy got off to a slow start this quarter.
RBS cut its GDP growth forecast to 1.5 percent from 2.0 percent in the Q3, Barclays now sees growth at 1.6 percent instead of 1.9 percent .
