Economy (The Third Horseman – Rev. 6)

WASHINGTON — The government says 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 0.2% in June, after accounting for the effects of higher prices, the poorest showing since a similar drop in February. The data show that higher prices reflected a big surge in gasoline costs and helped to drive an inflation gauge tied to consumer spending up 0.8% in June, the biggest increase since a 1% rise in February 1981.

More banks and financial institutions are likely to face insolvency and need bailouts before the global financial crisis is over, according to former Federal Reserve chairman Alan Greenspan. Writing in the Financial Times, Greenspan called the current crisis — which started a year ago — a once or twice in a century event and said insolvency would only end once U.S. house prices stabilized, underpinning mortgage-backed securities. Until then, the threat of collapse among banks and other global financial institutions would persist.

Oil prices fell below $120 a barrel Tuesday on expectations the economic downturn in the U.S. will erode consumer demand for crude products. The U.S. dollar's gains against the euro also contributed to lower oil futures' prices.

Deregulation of the airline industry 30 years ago made air travel affordable to most Americans. Rising airfares threaten to again make flying a service for the affluent. Airfares have risen this summer more than any year in the past quarter century, new studies by airfare experts show. The studies, done by Travelocity, FareCompare.com and Harrell Associates at USA TODAY's request, show that domestic fares this summer are up 12% to 15%, and on some routes, more than 200%. Airlines are raising fares to combat record jet-fuel prices, which have nearly doubled during the past 12 months. The fares often include fuel surcharges that can range from a few to hundreds of dollars, and a growing number of tickets include restrictions that require fliers to buy further in advance or stay a number of days at a destination. Fliers also face an escalating number of extra fees for roomy seats, checked bags, ticket changes and other services.