Consumer spending increases strongly; inflation rising

U.S. consumer spending increased solidly in July, pointing to strong economic growth early in the third quarter, while a measure of underlying inflation hit the Federal Reserve's 2 percent target for the third time this year.

The Commerce Department said on Thursday consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.4 percent last month after advancing by the same margin in June.

Households spent more at restaurants and on accommodation last month. There was also an increase in spending on prescription medication. Economists polled by Reuters had forecast consumer spending rising 0.4 percent in July.