US consumer spending beats estimates with core inflation steady

[WASHINGTON] US personal spending rose in August by more than forecast as underlying inflationary pressures held steady, illustrating a resilient consumer.

Inflation-adjusted consumer spending increased 0.4 per cent for a second month, according to Bureau of Economic Analysis data out Friday (Sep 26).

The so-called core personal consumption expenditures price index, which excludes food and energy items and is favoured by the Federal Reserve, rose 0.2 per cent from July. From the prior year, the gauge held stubbornly at 2.9 per cent.

The consecutive strong gains in consumer spending add to evidence of a solid economy in the current quarter, which would build upon even greater growth in the prior period than previously thought.

However, maintaining such momentum hinges in large part on the labour market, which has shown signs of faltering with slower hiring and more moderate wage gains.

Americans are also still dealing with sticky inflation, which risks staying elevated as President Donald Trump’s tariffs trickle through the economy. While many companies initially held off on raising prices as they worked through built-up inventories, profit margins are at risk unless firms pass along some of the higher costs.

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With inflation well above the Fed’s 2 per cent target, several policymakers are hesitant to cut interest rates further. While the September employment report will be a key data point at the central bank’s next policy meeting, it’s unclear if officials will have those numbers in hand with a government shutdown looming.

Stock futures climbed, and Treasury yields remained lower after the report. BLOOMBERG