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U.S. consumer spending rises; core inflation firms slightly

Stripping out the volatile food and energy components, the price measure rose 0.1 percent from the month before and 1.3 percent in the 12 months ended August.

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Workers’ incomes grew by 0.3% over the month and spending by another 0.4%, according to the Department of Commerce.

Monday’s report showed that consumers stepped up spending on durable goods – products like autos and electronics created to last at least three years – and services.

Economists surveyed by The Wall Street Journal had forecast 0.3 per cent growth in spending and a 0.4 per cent rise in incomes. “In real terms spending was also up 0.4% accelerating from an upwardly revised 0.3% July reading”, says TD Economics.

“This data provides further evidence that domestic spending momentum has continued into the third quarter, supporting our view that the American economy is able to navigate global headwinds and will continue to deliver above-trend economic growth”. “We expect firm spending ahead as employment remains solid and wages begin to accelerate”.

Consumers are a mainstay of the USA economy.

That’s a strong rebound from an anemic rate of 0.6 percent in the January-March period. Much of that bounce back reflects a surge in consumer spending, which grew at a 3.6 percent rate in the spring, double the rate in the winter.

Economic growth is expected to moderate to just above 2 per cent growth in the current quarter, a level consistent with the latest expansion. But they remain concerned that annual inflation is running well below the central bank’s target of 2%. In a speech last week, Fed Chair Janet Yellen also said she is ready to raise interest rates this year and intends to let the labor market run hot for a while to heal the lingering damage from the recession.

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The deflator for personal consumption expenditures was flat versus August and advanced at 0.3% year-on-year pace, the same as in August, as expected by analysts.

'We expect firm spending ahead as employment remains solid and wages begin to accelerate