U.S. Consumer Spending Report, largest gain since ‘09

us consumer spending

United States consumer spending, which makes up over two thirds of economic activity, has recorded the largest increase in over eight years in September.

The Commerce Department stated that consumer spending increased 1.0 percent last month which also included an increase from higher household spending on utilities, was the largest since August 2009.

The data was incorporated in the third quarter gross domestic product (GDP) report last Friday, which disclosed that growth in consumer spending growth reduced to a 2.4 percent annualized rate after a healthy 3.3 percent growth during in the second quarter.

The decrease in spending was made up for by an increase in inventory investment, business spending on equipment and a decrease in imports. This allowed the economy to grow at a 3.0 percent rate during the third quarter after the second quarter’s vigorous 3.1 percent rate.

September data did reflect effects of Hurricanes Harvey and Irma, but the Commerce Department stated that it is unable to calculate the effects on consumer spending and personal income.

Consumer spending in September was maintained by purchases of motor vehicles, as many people in Texas and Florida needed new vehicles after the storms. Spending on autos rose 3.2 percent in September.


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Though, interruptions in the supply chain because of the hurricanes probably added to an increase in inflation last month. The Federal Reserve’s favored inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, rose by 0.1 percent last month. The so-called core of PCE has increased by 0.1 percent for five months and 1.3 percent in last year. The core PCE has not reached the Fed’s 2 percent target for over five years.

When adjusted for inflation, consumer spending rose 0.6 percent in September after falling 0.1 percent in August. While that put consumer spending on an increased growth track as we approach the fourth quarter, the rate of increase is doubtful to continue along with moderate wage gains. Personal income increased 0.4 percent in September, while increasing 0.2 percent in August. Wages advanced by 0.4 percent and savings dropped to $441.9 billion in September from $521.4 billion in August.


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