WASHINGTON, (Reuters) – U.S. consumers spent more in August than was expected. However, a revision to July data left intact the expectation that growth would slow in the third trimester due to a resurgence of COVID-19 infected people.

According to the Commerce Department, consumer spending, which makes up more than half of U.S. economy activity, rose 0.8% in August. This is despite declining vehicle sales due to a worldwide shortage of semiconductors that has been undermining automobile production.

According to previously reported data, July spending fell 0.1% rather than increasing 0.3%. Reuters polled economists and predicted that consumer spending would rise 0.6% in August. Back-to-school shopping, government child tax credit payments and back-to school shopping likely increased spending.

Although spending has shifted back to goods from services, the spike in coronavirus infections in summer drove by the Delta variant of the virus, caused by the Delta variant, reduced demand for hotel accommodations and air travel. This also impacted sales at bars and restaurants.

Consumer spending accounts for the majority of total expenditure. Consumer spending growth is likely to slow in the third quarter, but it will resume its momentum for the remainder.

The trend towards fewer infections is encouraging a rising demand for high-contact travel services and other such activities.

The second quarter saw strong consumer spending growth at 12.0% annually. This was responsible for large parts of 6.7% economic growth, which lifted the gross domestic product over its highest point in the fourth quarter. The growth rate for the third quarter is below 5.0%.

David Kelly (NYSE:) Funds, New York, Chief Global Strategist at JPMorgan (NYSE) said, “Consumer momentum needs to improve in the next months, driving economic recovery closer to a complete post-pandemic recovery, and keeping inflation hot.”

The upward trend of inflation continued in August. Personal consumption expenditures prices (PCE) increased 0.3%, after rising by the same margin last July.

In August and the following 12 months, the core PCE price index grew 3.6%. It was almost the same gain as in July.

Core PCE price index, which is used by the Federal Reserve to calculate inflation for its flexible target of 2%, is what they prefer. Inflation projections for the core PCE were increased by Fed to 3.7% last week from 3.0% as in June.

The U.S. central banks indicated it was likely to reduce monthly bond purchases starting in November, and suggested that increases in interest rates could follow sooner than predicted.

Jerome Powell, Fed Chair and Speaker of the Fed, stated to lawmakers Thursday that he anticipates relief from inflation over coming months.