US consumer spending increases; lowest income gain in 15 months

WASHINGTON (Reuters) – US consumer spending rose for a seventh consecutive month in September, but income edged up in more than a year, in a context of moderate wage growth. which suggests that the current pace of spending should not be maintained.

The Commerce Department announced Monday that consumer spending, which accounts for more than two-thirds of US economic activity, had risen 0.4% last month as households bought more motor vehicles and spending more in health care.

August data was revised upwards to show that spending rose 0.5% instead of the previously announced 0.3% gain.

Economists polled by Reuters forecast an increase in consumer spending of 0.4% in September. After adjusting for inflation, consumer spending rose 0.3%. Real consumer spending rose 0.4% in August.

The data appeared in the report on gross domestic product released last Friday in the third quarter, which showed that consumer spending rose by 4.0% annualized, the highest rate in almost four years.

The economy grew 3.5% in the third quarter, a slowdown from the steady pace of 4.2% from April to June.

Prices for US Treasuries traded on Monday as US index futures were on the rise. The .DXY dollar was slightly stronger against a basket of currencies.

AUTUMN SAVINGS

The increase in real consumer spending in September put it on a solid growth trajectory in the fourth quarter.

But the dynamics may slow down. Personal income rose 0.2% in September, the smallest increase since June 2017, following a 0.4% gain in August. Wages rose 0.2% after jumping 0.5% in August.

Wage growth remains gradual, although the unemployment rate is close to 3.7%, its lowest level in 49 years. The savings rate fell to $ 975.7 billion last month, its lowest level since December 2017, up from $ 1.0 trillion in August.

The moderation of income and savings came at a time when the Trump administration's $ 1.5 trillion tax relief package was expected to peak. In addition, there is a selloff on the stock market, which erodes the wealth of households.

In September, spending on goods climbed 0.6%. Consumers also spent more on sporting goods. Spending on services rose 0.3%, as health care expenses offset lower spending on food and accommodation.

Prices continued to rise steadily in September. The price index of personal consumption expenditure, excluding unstable components of food and energy products, rose 0.2% after being stable in August.

This left the year-over-year increase in the PCE Base Price Index to 2.0% for a fifth consecutive month.

The basic PCE index is the preferred measure of inflation by the Federal Reserve. It reached the 2% inflation target of the US central bank in March for the first time since April 2012.

The Fed is expected to raise interest rates again in December, despite tighter financial market conditions resulting from the collapse of stock markets and rising US Treasury yields. The central bank raised rates in September for the third time this year and removed the reference to monetary policy as "accommodative" in its policy statement.