Incentives help boost spending in July

? Shoppers spent more freely in July, raising hopes that June’s economic lull could be coming to an end.

The Commerce Department reported Monday that consumers, key shapers of U.S. economic activity, boosted spending by 0.8 percent in July from the previous month. Their appetite to spend was led by a rebound in demand for big-ticket goods, such as cars, helped by buyers’ incentives.

The latest snapshot of buyer behavior marked an improvement from June, when consumers cut spending by 0.2 percent. High energy prices and a sluggish job market weighed on consumers’ willingness to spend, part of what Federal Reserve Chairman Alan Greenspan described as a “soft patch” in the economy.

Incentives on cars and discounting of other goods helped to bring buyers back in July. “Consumers know a deal when they see one and know when to wait for one to show up,” said Joel Naroff, president of Naroff Economic Advisors.

The 0.8 percent rise was slightly better than the 0.7 percent increase some economists had expected.

Americans’ incomes, the fuel for future growth, nudged up 0.1 percent in July, following a 0.2 percent rise in the previous month. July’s income growth fell short of some analysts’ calls for a 0.5 percent gain. The 0.1 percent rise matched an increase for November 2002 and was the smallest advance since income growth was flat in August 2002.

Income growth was held back by a decline in government payments — mainly a reduction in the federal matching rate for Medicaid reimbursements, which had been boosted by last year’s tax cuts. Wages and salaries, unchanged in June, rose by 0.4 percent in July.

The spending and income figures are not adjusted for price changes.

Libby Conner shops for clothes in the Gwinnett Place Mall in Duluth, Ga., in this July 29 photo. The Commerce Department reported Monday that consumer spending rebounded in July.

The Federal Reserve, hopeful that economic activity would strengthen in coming months, boosted short-term interest rates for a second time this year on Aug. 10 in an effort to ensure that inflation does not become a problem for the economy. The action left a key rate controlled by the Fed at 1.50 percent.

Analysts also are hoping the jobs climate will get better. The economy added just 32,000 positions in July. Economists forecast a gain of around 150,000 jobs for August, for which figures will be released Friday.