The expectation is that consumer spending edged up by a modest 0.2 percent in September, according to a survey of economists by data firm FactSet. It will take a pickup in wage growth to ensure American households remain the linchpin of economic growth heading into the all-important holiday shopping season.
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The report said personal income inched up by 0.1 percent in September after climbing by an upwardly revised 0.4 percent in August. This has translated into a robust pace of consumer spending over the last several quarters, which is expected to be maintained through the rest of this year and into 2016. To a large extent, the weakness in inflation is stemming from the continued pass through from lower energy prices and a higher dollar.
The Commerce Department says spending rose 0.1 percent in September, the weakest showing since spending fell in January when harsh winter weather kept shoppers from stores.
That figure missed the central bank’s 2% annual inflation target for the 41st month in a row. This inflation gauge is preferred by Federal Reserve policy makers and hasn’t met their 2 percent goal since April 2012. The so-called core PCE price index rose 1.3 percent in the 12 months through September after a similar gain in August.
Consumer spending increased at a 3.2 per cent rate in the third quarter, only slightly down from the 3.6% advance during the prior three months. The economy created just 142,000 jobs in September. The low inflation has been one of the reasons leading a few Fed officials to favor waiting a bit longer before raising rates.
Steady gains in consumer purchases will be needed to keep US growth churning. Friday’s report showed the breakdown for the quarter.
Consumer spending rose in September by the smallest amount since the start of the year, but mostly because Americans spent less on gasoline after another drop in prices.
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“The path of the labor market is going to be the prime driver of consumer spending growth in the months ahead, and if job gains do not reaccelerate, it is likely that consumer spending growth is going to decelerate”, Joshua Shapiro, chief U.S. economist atMFR Inc, said in a note to clients. The personal saving rate, which measures the share of a person’s disposable income that is saved, rose to 4.8 per cent, compared with 4.7 per cent in August. That compares with a daily average in 2014 of $3.34 per gallon. Prices were up just 0.2% from September 2014. Consumption has increased at a rate of more than 3 percent in each of the last two quarters.
