US Consumer Spending Grows at Fastest Pace Since 2009
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.