U.S. consumer spending rose solidly in October, suggesting the economy maintained its strong pace of growth early in the fourth quarter, although progress in slowing inflation appears to have stalled in recent months.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew 0.4% last month, following an upwardly revised 0.6% gain in September, the Bureau of Economic Analysis of the Department of Commerce.
Economists polled by Reuters had forecast consumer spending would rise 0.3%, following a 0.5% increase in September.
The Atlanta Fed currently estimates that the Gross Domestic Product will improve at an annualized rate of 2.6% this quarter. The economy grew at 2.8% in July-September.
Consumption is largely supported by the low level of layoffs, with additional help from the strength of household balance sheets thanks to the rebound in the stock market and high house prices.
Household savings remain high. Overall, economists predict a pretty decent holiday shopping season, although prices remain high and are putting pressure on budgets.
Although inflation is cooling, there does not appear to have been much progress in recent months in reducing it to the 2% target set by the Fed. The personal consumption expenditures (PCE) price index rose 0.2% in October, matching September’s unrevised increase. In the 12 months through October, the measure gained 2.3% after advancing 2.1% in September.
Excluding the volatile food and energy components, the PCE price index improved 0.3%, following a similar rise in September. In the 12 months to October, core inflation rose 2.8%, after rising 2.7% in September. The Fed tracks PCE price measures for monetary policy.
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