Consumer spending falls as prices jump

WASHINGTON — Consumer spending, after adjusting for inflation, fell in June as shoppers were hit with the second-biggest increase in prices in nearly three decades.

The Commerce Department reported Monday that consumer spending dipped by 0.2 percent in June, after removing the effects of higher prices, the poorest showing since a similar drop in February.

The higher prices reflected a big surge in gasoline costs and helped to drive an inflation gauge tied to consumer spending up by 0.8 percent in June, a monthly increase that has been exceeded only once since 1981. This price gauge jumped by 1 percent in September 2005 after Hurricane Katrina shut down oil production along the Gulf Coast.

The big rise in inflation ate up a part of the billions of dollars in stimulus payments delivered during the month. Personal incomes rose by 0.1 percent in June following a 1.8 percent increase in May.

In other economic news, the Commerce Department reported that orders to U.S. factories shot up at the fastest pace in six months in June, reflecting big increases in petroleum prices and heavy demand for military equipment.

Meanwhile, the savings rate, as a percent of after-tax incomes, dropped to 2.5 percent in June.