Consumer spending rebounded in September

Author: AP
Published:
Pictures of Money / Flickr / CC BY 2.0

WASHINGTON (AP) – Consumers boosted their spending in September at the fastest pace in three months, while their incomes grew by a modest amount.

Consumer spending increased 0.5 percent, a significant rebound from August when spending fell 0.1 percent, the Commerce Department said Monday. The increase was led by a 1.3 percent surge in spending on autos and other durable goods. Incomes increased 0.3 percent in September, slightly faster than the 0.2 percent gain in August.

The overall economy grew at a 2.9 percent rate in the July-September quarter, more than double the 1.4 percent increase in the second quarter. That acceleration in activity came even though growth in consumer spending slowed after a burst in the spring. But the latest figure indicates that the quarter ended on a positive note, with solid spending momentum heading into the end of the year.

Jennifer Lee, senior economist at BMO Capital Markets, said the report depicted a “good handoff” from the third quarter going into the fourth quarter.

“More money coming in helped support stronger spending,” Lee said, noting that the rise in incomes marked the seventh consecutive increase.

The September result was the best showing since a similar gain in June. While the quarter started well, spending slowed to a 0.3 gain in July before falling by 0.1 percent in August. Economists closely watch consumer spending since it accounts for two-thirds of economic activity.

In addition to the big gain in spending on durable goods, spending on non-durable goods such as clothing also showed a solid increase of 0.6 percent in September. Spending on services, a category that includes doctors’ visits and utility payments, was up 0.3 percent.

A key inflation gauge followed by the Federal Reserve was up a slight 0.2 percent in September, while core prices, excluding food and energy, rose only 0.1 percent. Over the past year, core prices are up just 1.7 percent, still below the Fed’s 2 percent inflation target.

Fed officials meet this week, but they are expected to its key policy rate unchanged at 0.25 percent to 0.5 percent, where it has been since December of last year.

With spending rising faster than incomes, the personal saving rate slipped slightly to 5.7 percent in September, down from 5.8 percent in August.

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