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US consumer spending weakest in eight months, savings jump
[WASHINGTON] US consumer spending fell in September for the first time in eight months, suggesting the economy lost some momentum heading into the fourth quarter.
The Commerce Department said on Friday consumer spending declined 0.2 per cent last month as demand for goods tumbled and services barely rose. Spending had increased by an unrevised 0.5 per cent in August.
Economists polled by Reuters had expected consumer spending, which accounts for more than two-thirds of US economic activity, to increase 0.1 per cent in September.
When adjusted for inflation, consumer spending fell 0.2 per cent. That was the first drop since April and followed a 0.5 per cent rise in August.
The data was included in Thursday's gross domestic product report, which showed the economy expanded at a 3.5 per cent annual rate in the third quarter after a 4.6 per cent pace in the second quarter.
The softer consumer spending at the end of the third quarter could add to expectations of slower growth in the final three months of the year. A report on Tuesday showed unexpected weakness in business spending plans for equipment in September.
But with gasoline prices at a near four-year low and faster job growth expected to boost wages, the slowdown in consumer spending could be temporary.
Income rose 0.2 per cent in September after increasing 0.3 per cent in the prior month. With income growth outpacing consumption, savings jumped to US$732.2 billion, the highest level since December 2012, from US$702.0 billion in August.
That lifted the saving rate to 5.6 per cent from 5.4 per cent in August.
Weak consumption kept a lid on inflation last month. A price index for consumer spending edged up 0.1 per cent after slipping 0.1 per cent in August. In the 12 months through September, the personal consumption expenditures (PCE) price index rose 1.4 per cent for a second straight month.
Excluding food and energy, prices rose 0.1 per cent for a third consecutive month. The so-called core PCE price index increased 1.5 per cent in the 12 months through September.
Both price measures continue to run below the US central bank's 2 per cent inflation target.