WASHINGTON, Sept 28 (Reuters) - U.S. consumer spending rose in August by the most in six months as households stretched to pay for higher gasoline prices, according to a government report on Friday that pointed to lackluster economic growth in the third quarter.

The Commerce Department said consumer spending increased 0.5 percent after an unrevised 0.4 percent gain in July. Last month's rise was in line with economists' expectations.

Consumer spending accounts for 70 percent of U.S. economic activity and the second straight month of increase mostly reflected higher gasoline prices, which rose 28.2 cents per gallon last month, though automobile purchases also helped.

Spending on nondurable goods jumped 1.7 percent in August after increasing 0.8 percent the previous month.

When adjusted for inflation, consumer spending edged up 0.1 percent after increasing 0.4 percent in July.

That suggests growth in consumer spending is unlikely to improve much this quarter from the tepid 1.5 percent annual pace recorded in the April-June period.

Slower consumer spending and a drop in farm inventories due to a severe drought in the Midwest held gross domestic product growth to a 1.3 percent pace in the second quarter, a step down from 2 percent in the first three months of the year.

With gasoline prices rising, inflation pressures picked up a bit last month. A price index for personal consumer expenditures increased 0.4 percent, the largest gain since March last year, after being flat in July.

In the 12 months through August, the PCE index rose 1.5 percent after increasing 1.3 percent in July.

However, the Federal Reserve's preferred inflation measure, which strips out food and energy costs, rose only 0.1 percent from July. The index advanced by the same margin in July.

In the 12 months to August, the core PCE index, increased 1.6 percent - matching July's increase.

The U.S. central bank has a 2 percent inflation target and the moderate rise in the PCE index last month should see the Fed maintain its accommodative monetary policy stance for a while as it seeks to spur job growth and domestic demand.

Income nudged up 0.1 percent but was eroded by the rise in inflation. The amount of income at the disposal of households after accounting for inflation and taxes fell 0.3 percent after ticking up 0.1 percent in July. That was the first decline since November.

With spending outstripping income growth, the saving rate slipped 3.7 percent last month from 4.1 percent in July.

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  • 10. Oklahoma

    <strong>Median household income:</strong> $43,225 <strong>Population:</strong> 3,791,508 (23rd lowest) <strong>Unemployment rate:</strong> 6.2 percent (8th lowest) <strong>Percent below poverty line:</strong> 17.2 percent (16th highest) Oklahoma remarkably low unemployment rate of 6.2 percent for a state that is among the nation's poorest. The poverty rate of 17.2 percent has inched up each year from the 2008 rate of 15.9 percent. The low median income suggests a need for higher paying jobs as Oklahoma relies heavily on agricultural production. Also, government and military, which tend to be low-paying jobs, account for the highest percentage of jobs in the state. But Oklahoma is also a major producer of oil and gas. Growth in the energy sector, which tends to pay more, would help improve on Oklahoma's median income of $43,225. <a href="http://247wallst.com/2012/09/20/americas-poorest-states-2/#ixzz278PXWQqP" target="_hplink">Read more at 24/7 Wall St. </a>

  • 9. South Carolina

    <strong>Median household income:</strong> $42,367 <strong>Population:</strong> 4,679,230 (24th highest) <strong>Unemployment rate:</strong> 10.3 percent (8th highest) <strong>Percent below poverty line:</strong> 18.9 percent (9th highest) South Carolina has been hit harder than many states by the recent economic downturn. The state's sizable tourism industry has slowed as families cut back on vacations. The state's 10.3 percent unemployment rate in 2011 was well above the 8.9 percent national rate. South Carolina's poverty rate of 18.9 percent was the ninth highest in the U.S. and significantly higher than the national rate of 15.9 percent. Moreover, approximately 6.5 percent of families made less than $10,000 a year, the fifth highest proportion in the country. Meanwhile, only 2.9 percent of families made more than $200,000 a year, the sixth-lowest rate in the country. <a href="http://247wallst.com/2012/09/20/americas-poorest-states-2/#ixzz278PXWQqP" target="_hplink">Read more at 24/7 Wall St. </a>

  • 8. New Mexico

    <strong>Median household income:</strong> $41,963 <strong>Population:</strong> 2,082,224 (15th lowest) <strong>Unemployment rate:</strong> 7.4 percent (18th lowest) <strong>Percent below poverty line:</strong> 21.5 percent (2nd highest) Last year, 7.2 percent of families in New Mexico earned less than $10,000, a larger proportion than in any state but Mississippi and Louisiana. In addition, 21.5 percent of residents lived below the poverty line, well above the national rate of 15.9 percent. As a result of poverty and limited job benefits, many New Mexicans cannot afford health insurance. Last year, 19.8 percent of the state's residents were uninsured. This was significantly higher than the national rate of 15.1 percent even though the cost of healthcare in New Mexico was slightly below the national average. <a href="http://247wallst.com/2012/09/20/americas-poorest-states-2/#ixzz278PXWQqP" target="_hplink">Read more at 24/7 Wall St. </a>

  • 7. Louisiana

    <strong>Median household income:</strong> $41,734 <strong>Population:</strong> 4,574,836 (25th highest) <strong>Unemployment rate:</strong> 7.3 percent (16th lowest) <strong>Percent below poverty line:</strong> 20.4 percent (3rd highest) Louisiana is located at the center of the poorest region in the country -- the Deep South along the gulf coast. When Hurricane Katrina struck the region in 2005, the southern part of the state was decimated, particularly the city of New Orleans. Six years later, the city was still recovering with almost 17 percent of families earning less than $10,000 per year, more than triple the national rate of 5.1 percent. By many measures, conditions are actually getting worse in the state. As of 2011, for the first time since Katrina, more than one in five residents lived below the poverty line, only slightly better than Mississippi and New Mexico. Louisiana's median income fell by more than the country as a whole, falling more than $2,000 between 2010 and 2011. <a href="http://247wallst.com/2012/09/20/americas-poorest-states-2/#ixzz278PXWQqP" target="_hplink">Read more at 24/7 Wall St. </a>

  • 6. Tennessee

    <strong>Median household income:</strong> $41,693 <strong>Population:</strong> 6,403,353 (17th highest) <strong>Unemployment rate:</strong> 9.2 percent (16th highest) <strong>Percent below poverty line:</strong> 18.3 percent (12th highest) In Tennessee some 6.1 percent of families, or about a third of families in poverty, made less than $10,000 in 2012, a percentage point higher than the national figure. Poverty in many of Tennessee's largest cities is even worse than the state as a whole. In Memphis, the state's largest city, 27.2 percent of the population lived below the poverty line, including 13.1 percent of households earning less than $10,000 a year. In Chattanooga, 28.7 percent of the population lived below the poverty line, including 16.3 percent of households earning less than $10,000 annually. While the state's median income was lower than most, Tennessee had the second-lowest overall cost of living in and the lowest cost of living for housing among all states in 2011. <a href="http://247wallst.com/2012/09/20/americas-poorest-states-2/#ixzz278PXWQqP" target="_hplink">Read more at 24/7 Wall St. </a>

  • 5. Alabama

    <strong>Median household income:</strong> $41,415 <strong>Population:</strong> 4,802,740 (23rd highest) <strong>Unemployment rate:</strong> 9 percent (18th highest) <strong>Percent below poverty line:</strong>19 percent (7th highest) In 2011, Alabama's median income was more than $9,000 below the nation's median income, while 6.4 percent of families lived off less than $10,000 a year -- higher than in all but five states. For the second year in a row, Alabama's poverty rate was 19 percent, remaining more than three percentage points above the national rate. Despite struggling with poverty, only 14.3 percent of Alabamians did not have health insurance last year -- slightly better than the national figure of 15.1 percent. It is likely that Alabama's cheap health care-the least expensive in the country for the fourth quarter of 2011-resulted in more insured residents.According to Gallup, since August of 2011 almost 23 percent of state residents reported not having enough money to buy food at least once. <a href="http://247wallst.com/2012/09/20/americas-poorest-states-2/#ixzz278PXWQqP" target="_hplink">Read more at 24/7 Wall St. </a>

  • 4. Kentucky

    <strong>Median household income:</strong> $41,141 <strong>Population:</strong> 4,369,356 (25th lowest) <strong>Unemployment rate:</strong> 9.5 percent (13th highest) <strong>Percent below poverty line:</strong> 19.1 percent (5th highest) Kentucky's unemployment rate of 9.5 percent, while not as high as states such as South Carolina and Mississippi, was well above the national rate of 8.9 percent. The employment rate will likely stay high in the near future as mining, a major industry in Kentucky, has declined in the past year due to a drop in natural gas prices. Severe poverty plagues the state, as 6.9 percent of families earned less than $10,000 in 2011, the fourth lowest of all states. Meanwhile, a mere 3 percent of Kentucky families earned more than $200,000 a year, the seventh-lowest rate in the country. Fortunately for those with lower incomes, Kentucky has the fourth-lowest cost of living in the U.S., including the second-lowest cost of living for groceries. <a href="http://247wallst.com/2012/09/20/americas-poorest-states-2/#ixzz278PXWQqP" target="_hplink">Read more at 24/7 Wall St. </a>

  • 3. Arkansas

    <strong>Median household income:</strong> $38,758 <strong>Population:</strong> 2,937,979 (19th lowest) <strong>Unemployment rate:</strong> 8 percent (tied-25th lowest) <strong>Percent below poverty line:</strong> 19.5 percent (4th highest) While the national median household income fell to $50,502 in 2011, Arkansas was just one of three states where median income remained below $40,000 for the year. Despite an unemployment rate of 8 percent in 2011, nearly one percentage point below the national rate, the 19.5% of families lived below the poverty line, one of the nation's highest rates. Poverty was slightly less of a problem in Little Rock, the state's largest city, which had a 16.4 percent poverty rate and a median income of $40,976. Despite having the third-lowest cost of health care nationwide at the end of 2011, 17.1 percent of residents lived without health insurance last year-well above the national figure of 15.1 percent. <a href="http://247wallst.com/2012/09/20/americas-poorest-states-2/#ixzz278PXWQqP" target="_hplink">Read more at 24/7 Wall St. </a>

  • 2. West Virginia

    <strong>Median household income:</strong> $38,482 <strong>Population:</strong> 1,855,364 (14th lowest) <strong>Unemployment rate:</strong> 8 percent (tied-25th lowest) <strong>Percent below poverty line:</strong> 18.6 percent (10th highest) West Virginia's median income of $38,482 was well off the median income of $40,093 in 2007. The state's unemployment rate of 8 percent was well below the 8.9 percent nationwide. But, like Kentucky, a softening mining sector in 2012 could weaken West Virginia's economy. The proportion of West Virginia residents without health insurance grew 4.9 percent, the third-largest increase in the U.S. Fortunately for cash-strapped residents, although the state's overall cost of living is in the middle of the pack compared to all other states, the cost of groceries is the third lowest in the country. <a href="http://247wallst.com/2012/09/20/americas-poorest-states-2/#ixzz278PXWQqP" target="_hplink">Read more at 24/7 Wall St. </a>

  • 1. Mississippi

    <strong>Median household income:</strong> $36,919 <strong>Population:</strong> 2,978,512 (20th lowest) <strong>Unemployment rate:</strong> 10.7 percent (4th highest) <strong>Percent below poverty line:</strong> 22.6 percent (the highest) The median income of the poorest state in the country, Mississippi, was just slightly less than 53 percent of the median income of Maryland, the richest state. Mississippi's median income-like many states- fell each year between 2008 and 2011, dropping $2,677 during that time. Not only did Mississippi have the highest poverty rate in the country, but 7.8 percent of Mississippi families made less than $10,000 in 2011, which was also the lowest rate in the country. While unemployment declined in most states between 2010 and 2011, Mississippi's actually rose 0.2 percentage points, one of only two states to see an increase in unemployment. <a href="http://247wallst.com/2012/09/20/americas-poorest-states-2/#ixzz278PXWQqP" target="_hplink">Read more at 24/7 Wall St. </a>