US consumer spending picks up speed in October
Washington (AFP) - US consumer spending picked up pace in October, despite a dip in income, the Commerce Department reported Friday.
Consumer spending rose 0.3 percent in October, matching the average estimate and accelerating slightly from a 0.2 percent in increase in September.
Personal income fell 0.1 percent instead of the 0.3 percent rise expected by most analysts. Incomes had climbed 0.5 percent in September and August. The October reading was the first decrease since January.
The October 1-16 partial government shutdown had no impact on government wages and salaries because Congress authorized back pay for federal workers furloughed during the shutdown, the department said.
But it said it could not separately identify in the data gathered any impacts of the shutdown on private wages or on consumer spending.
The uptick in consumer spending, which accounts for about two-thirds of US economic activity, came as Americans cut back on saving at the start of the fourth quarter. The rate of savings to disposable personal income dropped to 4.8 percent from 5.2 percent in September.
Inflation eased in October. The price index for personal consumption expenditures was essentially flat, falling less than 0.1 percent after a slight 0.1 percent increase in September.
The core PCE price, excluding food and energy, rose 0.1 percent, the same increase as in the prior month.
The key annual rate of the PCE price index, the Federal Reserve's preferred inflation gauge, slowed for the third consecutive month as energy prices continued to fall.
The yearly rate in October was 0.7 percent, down from 0.9 percent the prior month and well below the Fed's 2.0 percent inflation target.
The data came ahead of the Fed's December 17-18 monetary policy meeting as the central bank weighs whether to cut back $85 billion a month in asset purchases aimed at holding down long-term interest rates and bolster growth.
The report coincided with an upbeat jobs report from the Labor Department, showing the jobless rate fell sharply to 7 percent in November, a five-year low, and the economy added a solid 203,000 jobs.
The sharp drop in the unemployment rate, from 7.3 percent in October, was unexpected and raised the odds that the Fed could soon begin moving away from its huge stimulus plan.
"Inflation remains tame -- probably tame enough to encourage the Fed to temporarily hold off on tapering for one more meeting despite the very encouraging employment data recently," said Jim Sullivan of High Frequency Economics.
