Americans made more purchases than expected in August and a crucial inflation indicator cooled, the Commerce Department said yesterday, two indications that the economy is still somewhat insulated from turmoil in the residential housing market reports the New York Times.

But lagging consumer confidence and uncertainty in the labor sector could point toward sluggish growth in the coming months, analysts warned as a tumultuous third quarter came to a close.

Consumer spending rose a better-than-forecast 0.6 percent last month, the largest uptick since April, led by strong sales of durable goods. Income increased 0.3 percent, down from a 0.5 percent rise in July but in line with Wall Street forecasts. The rate of wage increases was also slightly down from July.

Separately, construction spending increased 0.2 percent in August after a 0.5 percent decline the month before, surprising many analysts who had predicted another drop. Nonresidential construction offset a decline in home building.

American business growth expanded in September as prices paid by producers dipped to the lowest level since January, according to the Chicago arm of the National Association of Purchasing Management, whose benchmark index of business activity rose to 54.2 this month, from 53.8 in August.

“There’s a huge divergence in performance in this economy between the home-building sector, which is terrible, and everything else, which seems to be doing O.K.,” said David Kelly, an economic adviser at Putnam Investments. “Strong consumer spending for August, and the strong construction spending now, really tell us that outside of home building there is plenty of demand in the economy.”

Read it here: Consumer Spending