Americans save less, spend more

Americans kept spending in September as income gains cooled, pushing down the savings rate to its lowest level this year. Inflation matched the Federal Reserve’s target, reinforcing the central bank’s outlook for gradual interest-rate hikes.

Purchases, which account for about 70% of the economy, rose 0.4% from the previous month, matching economists’ estimates, after an upwardly revised 0.5% increase, Commerce Department figures showed Monday. Incomes advanced a less-than-projected 0.2%, the weakest in more than a year, while Americans saved 6.2% of their disposable income, matching the lowest level since 2013.

The figures show spending in September helped lift consumption during the quarter to what gross domestic product data released Friday showed was the fastest increase since 2014. Last month’s rise reflected gains in spending on durable goods, particularly motor vehicles and parts. At the same time, the slower-than-expected income growth suggests that any meaningful, sustained pay gains remain elusive, though Hurricane Florence may have had an effect on September’s figures.

Risks to the outlook include President Trump’s trade war — which is boosting prices and making some companies hesitant to invest — as well as a stock market swoon and a fading of the effects from fiscal stimulus. At the same time, consumer optimism remains elevated amid a tight labor market and lower taxes, providing support for spending in the final quarter.

The report “bodes well for the consumer remaining strong through the end of the year,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. “You never like to see the savings rate falling, but it’s still at a robust level.”