By Lucia Mutikani

WASHINGTON(Reuters) - U.S. consumer spending surged in August, but outlays adjusted for inflation were weaker than initially thought in the prior month, reinforcing expectations that economic growth slowed in the third quarter as COVID-19 infections flared up.

The report from the Commerce Department on Friday, which showed inflation remaining hot in August, raised the risk of consumer spending stalling in the third quarter, even if spending accelerates further in September. Inflation-adjusted, or the so-called real consumer spending is what goes into the calculation of gross domestic product.

"Third quarter consumer spending is on track for only a scant gain," said Tim Quinlan, a senior economist at Wells Fargo in Charlotte, North Carolina. "If COVID cases keep falling and sentiment turns positive, there is scope for a more solid finish to this tumultuous year."

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rebounded 0.8% in August. Data for July was revised down to show spending dipping 0.1% instead of gaining 0.3% as previously reported.

Consumption was boosted by a 1.2% rise in purchases of goods, reflecting increases in spending on food and household supplies as well as recreational items, which offset a drop in motor vehicle outlays. A global shortage of semiconductors is undercutting the production of automobiles.

Goods spending fell 2.1% in July. Spending on services rose 0.6% in August, supported by housing, utilities and health care. Services, which account for the bulk of consumer spending, increased 1.1% in July. Spending is shifting back to services from goods, but the resurgence in coronavirus cases, driven by the Delta variant, crimped demand for air travel, hotel accommodation and sales at restaurants and bars.

Economists polled by Reuters had forecast consumer spending increasing 0.6% in August.

Inflation maintained its upward trend in August, though price pressures have probably peaked. The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, climbed 0.3% after increasing by the same margin in July. In the 12 months through August, the so-called core PCE price index increased 3.6%, matching July's gain.

The core PCE price index is the Federal Reserve's preferred inflation measure for its flexible 2% target. The U.S. central bank last week upgraded its core PCE inflation projection for this year to 3.7% from 3.0% back in June.

The Fed said it would likely begin reducing its monthly bond purchases as soon as November and signaled interest rate increases may follow more quickly than expected. Fed Chair Jerome Powell, who has maintained that high inflation is transitory, told lawmakers on Thursday that he anticipated some relief in the months ahead.