Rising prices beat down consumer spending in June

WASHINGTON - Consumer spending, after adjusting for inflation, fell in June as shoppers were hit with the biggest increase in prices in nearly three decades.

The Commerce Department reported Monday that consumer spending dipped by 0.2 percent in June, after removing the effects of higher prices, the poorest showing since a similar drop in February. The higher prices reflected a big surge in gasoline costs and helped to drive an inflation gauge tied to consumer spending up by 0.8 percent in June, the biggest increase since a 1 percent rise in February 1981.The big rise in inflation ate up a part of the billions of dollars in stimulus payments delivered during the month. Personal incomes rose by a tiny 0.1 percent in June following a giant 1.8 percent increase in May.Stocks declined in early trading as investors fretted about what rising prices would do to consumer spending. The Dow Jones industrial average fell 63.02, or 0.56 percent, to 11,263.30 in early trading.In other economic news, the Commerce Department reported that orders to U.S. factories shot up at the fastest pace in six months in June, reflecting big increases in petroleum prices and heavy demand for military equipment.