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US consumer spending rises moderately, wages flat
[WASHINGTON] US consumer spending rose marginally in September while wages were unchanged, which could cast doubts on consumers' ability to continue driving the economy amid a deepening slump in business investment.
The Commerce Department said on Thursday consumer spending, which accounts for more than two-thirds of US economic activity, gained 0.2 per cent last month as households stepped up purchases of motor vehicles and spent more on healthcare.
Data for August was revised up to show consumer spending climbing 0.2 per cent instead of the previously reported 0.1 per cent rise. Economists polled by Reuters had forecast consumer spending would advance 0.2 per cent last month.
The data was included in the gross domestic product report for the third quarter, which was published on Wednesday.
The government reported that growth in consumer spending slowed to a still-healthy 2.9 per cent annualised rate last quarter after surging at a 4.6 per cent pace in the second quarter, the fastest since the fourth quarter of 2017. That softened some of the blow on the economy from a deepening slump in business investment.
The economy grew at a 1.9 per cent rate in the third quarter after expanding at a 2.0 per cent pace in the April-June period.
Consumer spending is being powered by the lowest unemployment rate in nearly 50 years. There are, however, concerns that business investment, which has contracted for two straight quarters, could eventually spill over to the labour market and crimp consumer spending.
The Federal Reserve cut interest rates on Wednesday for the third time this year, but signaled a pause in the easing cycle, which started in July when it reduced borrowing costs for the first time since 2008. Fed Chair Jerome Powell said he expected the economy to continue on a moderate growth path, supported by "solid household spending and supportive financial conditions."
Inflation was tame in September. Consumer prices as measured by the personal consumption expenditures (PCE) price index were unchanged for a second straight month in September as the cost of energy goods and services dropped 1.3 per cent.
In the 12 months through September, the PCE price index increased 1.3 per cent after rising 1.4 per cent in the 12 months through August.
Excluding the volatile food and energy components, the PCE price index was also unchanged last month after gaining 0.1 per cent in August. That lowered the annual increase in the so-called core PCE price index to 1.7 per cent in September from 1.8 per cent in August.
The core PCE index is the Fed's preferred inflation measure and had undershot the U.S. central bank's 2 per cent target this year.
When adjusted for inflation, consumer spending rose 0.2 per cent in September, matching August's gain.
Personal income rose 0.3 per cent in September, driven by an increase in farm proprietors' income, likely related to payments to farmers caught in the US-China trade war.
Income jumped 0.5 per cent in the prior month. Wages were unchanged after surging 0.6 per cent in August. With income growth outpacing spending, savings rose to US$1.38 trillion from US$1.35 trillion in August.