U.S. consumer spending slows in October, inflation
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[November 30, 2017]
WASHINGTON (Reuters) - U.S. consumer
spending slowed in October as the hurricane-related boost to motor
vehicle purchases faded, while underlying price pressures pushed higher
for a second straight month, suggesting a recent disinflationary trend
has probably run its course.
The Commerce Department said on Thursday consumer spending, which
accounts for more than two-thirds of U.S. economic activity, rose 0.3
percent last month after a downwardly revised 0.9 percent jump in
Consumer spending in September posted its largest gain since August 2009
and was buoyed by drivers in Texas and Florida replacing automobiles
destroyed when Harvey and Irma slammed the states in late August and
Economists polled by Reuters had forecast consumer spending increasing
0.3 percent in October after a previously reported 1.0 percent rise in
September. Spending on long-lasting goods like autos fell 0.1 percent
last month after surging 2.9 percent in September. Spending on
nondurable goods rose 0.2 percent and outlays on services increased 0.3
Though overall inflation subsided as disruptions to the supply chain
following the hurricanes eased, underlying price pressures increased
again at a steady clip in October.
The Federal Reserve's preferred inflation measure, the personal
consumption expenditures (PCE) price index excluding food and energy,
rose 0.2 percent in October after a similar gain in September. The
so-called core PCE increased 1.4 percent in the 12 months through
October, matching September's rise.
The core PCE has undershot the Fed's 2 percent target for nearly 5-1/2
years. Signs that the disinflationary trend from earlier this year was
probably over bolsters expectations that the Fed will raise interest
rates next month. The U.S. central bank has increased borrowing costs
twice this year.
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People shop at The Grove mall in Los Angeles November 26, 2013.
REUTERS/Lucy Nicholson/File Photo
Fed Chair Janet Yellen told lawmakers on Wednesday that she believed the recent
weak inflation readings likely reflected "transitory factors." Yellen
acknowledged the low inflation rates "could reflect something more persistent."
With underlying inflation rising, the so-called real consumer spending edged up
0.1 percent in October after increasing 0.5 percent in September.
That will probably do little to change economists' expectations of solid
consumer spending growth in the fourth quarter because September's strong gain
put consumption on a higher growth trajectory.
Consumer spending grew at a 2.3 percent annualized rate in the third quarter,
slowing from the April-June quarter's brisk 3.3 percent pace. Spending is,
however, coming at the expense of savings as income growth remains moderate.
Personal income rose 0.4 percent last month after advancing by the same margin
in September. Wages rose 0.3 percent last month. Savings increased to $457.3
billion in October from $429.9 billion in the prior month, which was the lowest
level since August 2008.
The saving rate increased to 3.2 percent after falling to 3.0 percent in
September, which was lowest since December 2007.
((Reporting by Lucia Mutikani; Editing by Andrea Ricci))
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