US: consumer spending increases in the third quarter

US consumer spending rose more than expected in September as underlying inflation pressures continued to simmer, with the Federal Reserve expected to raise interest rates another three-quarters of a point next week.

However, more encouraging data from the Department of Labor this Friday reflected that the increase in wages in private industry slowed considerably in the third quarter.

“Americans will say they’re worried about inflation, but they’re still out shopping and that’s keeping the economy growing for another quarter,” said Christopher Rupkey, chief economist at FWDBONDS in New York.

He added that “there can be no relief to inflationary pressures in the short term if demand does not decrease.”

Consumer spending, which accounts for more than two-thirds of economic activity in the US, rose 0.6% last month, according to Commerce Department data released Friday.

On the other hand, the figures for August were revised upwards and now reflect that there was an increase of 0.6% instead of the 0.4% previously reported.

Consumers increased their vehicle purchases and spent more on food, clothing, prescription drugs and recreational goods. There were also increases in spending on services, driven by housing and energy, as well as travel and restaurant meals.

The data was included in Thursday’s report on economic activity in the third quarter, which reflected growth after contraction in the first and second quarters.

The 2.6% annualized growth in the third quarter was largely driven by a sizeable decline in the trade deficit.

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