The Commerce Department reported Friday that consumer spending increased in August at the strongest rate in four months, Reuters reported.

Core consumer prices posted their lowest year-on-year rise in three and a half years.

Wall Street forecast a 0.4 percent gain in spending compared with the actual 0.6 gain for August, up from a 0.4 percent rise in July. August incomes moved up 0.3 percent, a decrease from the 0.5 percent rise in July.

Core consumer prices, not including food and energy items, are measured monthly; those prices have increased 0.1 percent for six straight months. During the past 12 months core prices were up 1.8 percent, the smallest since 1.8 percent increase in February 2004.

Federal Reserve policy-makers have been watching the economy for signs of inflation, and the soft rise of core consumer price could be reassuring.