Consumers shrugged off a rash of bad news to spend more than expected in August while a key measure of inflation eased to the slowest pace in 3 1/2 years. Construction activity also rose above expectations.

While the worst slump in housing in 16 years and the severe credit crunch that developed in August have raised worries, the good news on consumer spending should bolster the view that the economy will be able to escape the current slowdown without going into a recession. Consumer spending accounts for two-thirds of total economic growth.