By Shobhana Chandra Oct. 1 (Bloomberg) -- Spending by U.S. consumers climbed in August by the most since 2001, indicating the biggest part of the economy is starting to rebound from its worst slump in almost three decades. The 1.3 percent increase in purchases was larger than forecast and followed a 0.3 percent gain in the prior month that was bigger than previously estimated, Commerce Department figures showed today in Washington. Incomes climbed 0.2 percent for a second month and inflation decelerated. Automakers including General Motors Co. benefited from the Obama administration’s $3 billion “cash-for-clunkers” incentives. A projected drop in auto purchases last month is a reminder that such gains will be hard to sustain as the stimulus programs expire and households grapple with rising joblessness and stagnant incomes. “We’re seeing sparks of life in the consumer, which is very important at this stage of the economic recovery,” Lindsey Piegza, an economist at FTN Financial in New York, said before the report. Even so, “spending is not going to be as robust as we’d like. Income growth will remain constrained for some time, and consumers’ burden of debt is not something that can be fixed quickly.” A report from the Labor Department showed the number of Americans filing first-time claims for jobless benefits rose more than forecast last week, a sign companies are still cutting workers as the economy pulls out of the recession. Applications rose by 17,000 to 551,000 in the week ended Sept. 26. Stocks Retreat Stock-index futures extended losses and Treasury securities rose following the reports on concern over mounting job losses. The contract on the Standard & Poor’s 500 Index was down 0.5 percent to 1,048 at 8:39 a.m. in New York. The yield on the benchmark 10-year note fell to 3.28 percent from 3.31 percent late yesterday. Economists forecast spending would rise 1.1 percent, after an originally reported increase of 0.2 percent the prior month, according to the median of 80 estimates in a Bloomberg News survey. Projections ranged from gains of 0.1 percent to 1.6 percent. Most Since 2001 The August increase in spending was the biggest since October 2001 and reflected broad-based increases in goods and services. “Economic activity has picked up,” the Federal Reserve said last week. At the same time, household spending “remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.” Fed policy makers, who also said they’d keep the benchmark lending rate near zero “for an extended period,” are trying to secure an economic recovery while withdrawing fiscal and monetary stimulus in time to avoid driving inflation and borrowing costs higher. The tame inflation readings in today’s report indicate policy makers need not rush to remove the trillions of dollars they’ve pumped into financial markets. The price gauge tied to spending patterns was down 0.5 percent from August 2008. The Fed’s preferred price measure, which excludes food and fuel, climbed 0.1 percent from the previous month and was up 1.3 percent from a year earlier, the smallest year-over-year gain since September 2001. Recession Eased A report yesterday showed the worst U.S. recession since the Great Depression eased more than anticipated in the second quarter. Consumer spending, which accounts for about 70 percent of the economy, fell at a 0.9 percent pace, less than the government previously estimated. Adjusted for inflation, spending increased 0.9 percent, following a 0.2 percent gain the prior month. Because the increase in spending was bigger than the gain in incomes, the savings rate fell to 3 percent from 4 percent the prior month. Inflation-adjusted spending on durable goods, such as autos, furniture, and other long-lasting items, jumped 5.8 percent in August after rising 1.8 percent in the prior month. Buyers responded to the government offer of as much as $4,500 to trade in older, less fuel-efficient cars and trucks in August. Industry figures showed auto sales climbed to a one-year high in August. Auto sales last month, due later today, probably fell to the second-lowest pace this year, according to the median estimate of analysts surveyed by Bloomberg News. Broad-Based Gains Consumer purchases of non-durable goods increased 1 percent, today’s report showed, and spending on services, which account for almost 60 percent of all outlays, rose 0.2 percent. Best Buy Co., the world’s largest electronics retailer, yesterday said it plans to hire more seasonal holiday workers this year to help meet demand for flat-panel televisions and mobile phones. The Richfield, Minnesota-based company expects to sell more merchandise this holiday season than last, Chief Executive Officer Brian Dunn said at a briefing. A report from the Labor Department tomorrow may show payrolls fell by 175,000 workers in September after a 216,000 drop the prior month, according to the survey median. The jobless rate will probably climb to 10 percent by year-end, the highest level since 1983. It reached 9.7 percent in August.

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