The Commerce Department said personal income increased 0.4 percent last month, accelerating after a 0.2 percent gain in September.
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Personal spending, which measures how much Americans paid for everything from toasters to health care, increased 0.1% in October from a month earlier, the Commerce Department said Wednesday.
The economy could get support from business spending.
“People don’t spend the windfall from lower heating bills and falling gas prices immediately, so the combination of these factors and the rebound in incomes… drove the saving rate up to a three-year high of 5.6 percent”, Shepherdson said.
Household spending rose less than forecast in October, showing the biggest part of the US economy was off to a slow start heading into the holiday-shopping season.
With the jobs market continuing to improve, Fed officials have strongly signaled they could nudge the rate up for the first time in almost a decade. The greenback has gained 18.1 percent against the currencies of the United States’ main trading partners since June 2014. Economists also believe that the bulk of spending cuts by oil field firms like Schlumberger (SLB.N) in response to lower crude prices have already been implemented.
In October, spending on durable goods such as cars was flat after a 0.5 percent rise in September. They tucked it away, pushing the personal saving rate – savings as a percentage of disposable personal income – to 5.6 percent from 5.3 percent in September.
Steady gains in consumer purchases will be needed to keep US growth churning. But as the labor market continues to tighten, there is optimism that wage growth will pick up and encourage consumers to loosen their purse strings and boost spending.
Weekly applications for unemployment benefits dropped 12,000 last week to a seasonally adjusted 260,000.
On the other hand, consumer saving increased to $761.9 billion in October, from $722.9 billion in September; this is the highest level since September 2012. The data “indicate the indelible impact that the [recession] has had in making consumers more cautious spenders”.
There was still no sign of inflation, which has persistently run below the Federal Reserve’s 2 percent target.
The price index for PCE decreased 0.1 percent, after decreasing 0.1 percent in September.
Worker pay increased 2.5 percent over the 12 months ended in October, the most in more than six years, following a 2.3 percent gain the prior month.
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Spending on services such as haircuts and auto repairs rose 0.1 percent after bigger gains of 0.4 percent in August and September.
