US Con­sumer Spend­ing Grows at Fastest Pace Since 2009

The Economic Times - - Money -

Washington: US con­sumer spend­ing recorded its big­gest in­crease in more than eight years in Septem­ber, likely as house­holds in Texas and Florida re­placed flood-dam­aged mo­tor ve­hi­cles, but un­der­ly­ing in­fla­tion re­mained muted.

House­holds, how­ever, dipped into their sav­ings to fund pur­chases last month, push­ing sav­ings to their low­est level since 2008. Against the back­drop o f l a ckl ust e r wage growth, the drop in sav­ings sug­gests that Septem­ber’s ro­bust pace of con­sumer spend­ing is prob­a­bly un­sus­tain­able. “Re­ly­ing on con­sumer sav­ings to move the econ­omy for­ward is not go­ing to last for long,” said Chris Rup­key, chief economist at MUFG in New York. The Com­merce Depart­ment said on Mon­day con­sumer spend­ing, which ac­counts for more than two-thirds of US eco­nomic ac­tiv­ity, jumped 1.0% last month af­ter an un­re­vised 0.1% gain in Au­gust. The in­crease, which also in­cluded a boost from higher house­hold spend­ing on util­i­ties, was the largest since Au­gust 2009. Econ­o­mists had fore­cast con­sumer spend­ing in­creas­ing 0.8% in Septem­ber. The data was in­cluded in last Fri­day’s third-quar­ter gross do­mes­tic prod­uct re port, which showed con­sumer spend­ing growth slow­ing to a 2.4% an­nu­alised rate af­ter a ro­bust 3.3% pace in the se­cond quar­ter. The mod­er­a­tion in con­sump­tion was off­set by a rise in in­ven­tory in­vest­ment, busi­ness spend­ing on equip­ment and a drop in im­ports, which left the econ­omy grow­ing at a 3.0% rate in the third quar­ter af­ter the April-June pe­riod’s brisk 3.1% pace.

US fi­nan­cial mar­kets were lit­tle moved by the data ahead of the Fed­eral Re­serve’s two-day pol­icy meet­ing, which starts on Tues­day. In­vestors were also await­ing the an­nounce­ment of a new Fed chief, which is ex­pected this week. Prices for US Trea­suries were trad­ing higher, while the dol­lar fell against a bas­ket of cur­ren­cies. Stocks on Wall Street were largely flat. The Com­merce Depart­ment said the Septem­ber data re­flected the ef­fects of Hur­ri­canes Har­vey and Irma, but said it could not quan­tify the to­tal im­pact of the storms on con­sumer spend­ing and per­sonal in­come.

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