Investors have been doubtful, with many betting that the Fed’s first rate increase in a decade won’t come until March.
But the U.S. dollar firmed following the consumer spending report, as did yields on U.S. government debt, signs that some investors were bringing forward their bets on a rate increase.
Economists polled by Reuters had forecast consumer spending rising 0.3 percent last month. Consumer spending accounts for more than two-thirds of U.S. economic activity.
It was the latest report indicating momentum in the economy as it confronted recent global financial markets turbulence, sparked by concerns over a slowing Chinese economy, which pushed the Fed to hold off hiking rates earlier in September.
The economy grew at a robust 3.9 percent annual rate in the second quarter.
Last month, spending on long-lasting goods such as automobiles increased 0.9 percent. Outlays on services like utilities rose 0.5 percent.
Personal income increased 0.3 percent in August.
Overall inflation remained muted, reflecting low oil prices. Inflation, which has persistently run below the Fed’s 2 percent target in annual terms, rose just 0.3 percent in August from the same month a year earlier.
However, prices were up 1.3 percent when excluding food and energy, a key metric used by the Fed to gauge the trend rate of inflation. In July, core prices rose 1.2 percent year-over-year.
Despite the positive signals for consumer spending, the U.S. housing market appeared to loose a step last month, with contracts to buy previously owned U.S. homes falling 1.4 percent.