US consumer spending climbs the most in three months
Top driver which accounts for 70 per cent of US economy shows strength
Consumer purchases climbed in September by the most in three months as incomes grew, signalling momentum in the biggest part of the US economy.
The 0.5 per cent advance in spending, which accounts for about 70 per cent of the economy, followed a 0.1 per cent decline the prior month that was revised lower, a Commerce Department report showed Monday. The median forecast in a Bloomberg survey called for a 0.4 per cent gain.
While the results indicate a solid handoff into the final quarter of 2016, disposable income, or the inflation-adjusted money left over after taxes, was little changed for a second month, indicating wages will need to pick up to boost spending even more. Such support is needed to drive faster economic growth, which picked up last quarter despite softer household purchases.
“We entered the holiday quarter with good support from the consumer,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “As long as we continue to see employment growth and wage growth, that’ll put more money in people’s pockets and give them the ability to spend at a faster pace.”
Nominal incomes rose 0.3 per cent after a 0.2 per cent gain. Rising inflation, however, is taking a bigger toll. Disposable incomes were up 2.1 per cent in September from a year earlier, the weakest advance since January 2014.
Inflation-adjusted spending rose 0.3 per cent in September after a 0.2 per cent decline. The advance in purchases included a 1.8 per cent jump in durable goods.
The September figures provide more perspective on how consumer spending was doing toward the end of the quarter. Gross domestic product climbed at a 2.9 per cent annualised rate in the third quarter after a sluggish first half, data showed Friday. Household purchases grew 2.1 per cent, or about half the pace as in the previous three-month period.
For September, forecasts for consumer spending ranged from no change to an increase of 0.6 per cent, according to the Bloomberg survey. The previous month’s reading was initially reported as little-changed. The Bloomberg survey median for incomes was 0.4 per cent, after a previously reported 0.2 per cent gain.
The saving rate decreased to 5.7 per cent from 5.8 per cent. Wages and salaries rose 0.3 per cent.
The report’s price gauge based on the personal consumption expenditures index, the Federal Reserve’s preferred measure of inflation, rose 1.2 per cent from a year earlier, the most since November 2014.
The core price measure, which excludes food and fuel, increased 1.7 per cent from September 2015. Inflation hasn’t reached the Fed’s 2 per cent goal since 2012.
The Fed’s rate-setting committee meets on November 1-2, and investors see a slim chance for a rate move this week, with a higher probability for December.