US con­sumer spend­ing rises, in­fla­tion edges up Core PCE price in­dex rises 1.7% from year ago

Kuwait Times - - BUSINESS -

US con­sumer spend­ing rose more than ex­pected in Septem­ber as house­holds boosted pur­chases of mo­tor ve­hi­cles and in­fla­tion in­creased steadily, which could bol­ster ex­pec­ta­tions of an in­ter­est rate hike from the Fed­eral Re­serve in De­cem­ber.

The Com­merce Depart­ment said yes­ter­day that con­sumer spend­ing, which ac­counts for about 70 per­cent of US eco­nomic ac­tiv­ity, in­creased 0.5 per­cent af­ter a down­wardly re­vised 0.1 per­cent drop in Au­gust. Last month’s in­crease in con­sumer spend­ing of­fered a fairly strong hand­off from the July-Septem­ber pe­riod to the cur­rent quar­ter.

The re­port was pub­lished ahead of the be­gin­ning of the Fed’s two-day pol­icy meet­ing to­day. The US cen­tral bank is not ex­pected to raise rates at that meet­ing, which comes ahead of the Nov. 8 pres­i­den­tial elec­tion, but is ex­pected to do so in De­cem­ber.

Econ­o­mists polled by Reuters had fore­cast con­sumer spend­ing ris­ing 0.4 per­cent last month. Spend­ing in Au­gust was pre­vi­ously re­ported to have been un­changed. When ad­justed for in­fla­tion, con­sumer spend­ing rose 0.3 per­cent af­ter fall­ing 0.2 per­cent in Au­gust.

The spend­ing fig­ures were in­cor­po­rated into last Fri­day’s re­port on third-quar­ter gross do­mes­tic prod­uct. Con­sumer spend­ing in­creased at a 2.1 per­cent an­nual pace af­ter ad­vanc­ing at a ro­bust 4.3 per­cent rate in the prior pe­riod. US Trea­sury yields fell on the data, while US stock in­dex fu­tures ex­tended gains slightly. The dol­lar was lit­tle changed.

De­spite cool­ing off, con­sumer spend­ing com­bined with a spurt in soy­bean ex­ports and a turn­around in in­ven­tory in­vest­ment to boost eco­nomic growth to a 2.9 per­cent pace in the third quar­ter. The econ­omy grew at a 1.4 per­cent rate in the April-June quar­ter.

With con­sumer spend­ing firm­ing, in­fla­tion con­tin­ued to gain steadily. The per­sonal con­sump­tion ex­pen­di­tures (PCE) price in­dex in­creased 0.2 per­cent af­ter a sim­i­lar gain in Au­gust. In the 12 months through Septem­ber the PCE price in­dex rose 1.2 per­cent, the big­gest gain since Novem­ber 2014, af­ter ad­vanc­ing 1.0 per­cent in Au­gust.

Ex­clud­ing food and en­ergy, the so-called core PCE price in­dex rose 0.1 per­cent af­ter ris­ing 0.2 per­cent in Au­gust. In the 12 months through Septem­ber the core PCE in­creased 1.7 per­cent af­ter a sim­i­lar in­crease in Au­gust. The core PCE is the Fed’s pre­ferred in­fla­tion mea­sure and is run­ning be­low its 2 per­cent tar­get. Con­sumer spend­ing last month was lifted by a 1.3 per­cent surge in pur­chases of long-last­ing man­u­fac­tured goods such as au­to­mo­biles. Spend­ing on ser­vices rose 0.3 per­cent. Per­sonal in­come in­creased 0.3 per­cent in Septem­ber af­ter ris­ing 0.2 per­cent in Au­gust. Wages and salaries ad­vanced 0.3 per­cent af­ter edg­ing up 0.1 per­cent the prior month. Sav­ings fell to $797.8 bil­lion from $820.5 bil­lion in Au­gust. — Reuters

TETERBORO, NJ: Choisette Har­gon, of Pater­son, NJ, shops for toys ahead of Christ­mas at Wal­Mart in Teterboro, NJ. The Com­merce Depart­ment is­sued its Septem­ber re­port on con­sumer spend­ing yes­ter­day which ac­counts for roughly 70 per­cent of US eco­nomic ac­tiv­ity. — AP

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