Despite what economists predict will be a challenging fourth quarter, US consumer spending rose more than expected in September as households bought vacations and new cars.
Despite rising housing costs, underlying monthly inflation increased in September, according to a report released by the Commerce Department on Friday. Even though the Federal Reserve may still raise interest rates, most economists predict the Fed will stop doing so when the surplus savings from the Covid-19 pandemic run out.
Sal Guatieri, senior economist at BMO Capital Markets in Toronto, told CNBC that US consumers still had some gas left in the tank last month.
Despite our still-stubborn service inflation, the Fed faces the risk that spending and the economy will run hotter than it needs to to arrest ongoing inflation in the fourth quarter.
Last month, consumer spending increased 0.7%, accounting for more than two-thirds of all economic activity in the United States, according to the Bureau of Economic Analysis of the Commerce Department. In August, spending increased by 0.4% unrevised. According to Reuters, economic experts predict an increase in spending of 0.5%.
Both commodities and services contributed to the increase in spending last month. Goods expenditures increased by 0.7%, driven primarily by prescription medications, light trucks, food and beverages, recreational items, and automobiles.
Travel and overseas accommodation services contributed to an increase of 0.8%, primarily due to aircraft transportation, housing and utilities, and healthcare.
According to the third quarter’s advance GDP report, released on Thursday, the information was included. Consumer spending increased at its fastest rate in almost two years, helping the economy grow at its fastest rate in almost two years.
According to the U.S. Census Bureau, consumer spending increased 0.4% after accounting for inflation in September following an increase of 0.1% in August. Expenditures in the fourth quarter are expected to be strong, based on the strong performance from April-June.
Due to the spike in expenditures last month resulting from savings, the rate of growth may slow down. Despite only a 0.3% increase in personal income in August, wages increased by 0.4% this month. In contrast to the 0.5% increase in wages the previous month, wages increased by 0.4% this month. A new round of student loan repayments began in October for millions of Americans.
There was a 3.4% savings rate in August, in place of the 4.0% saved in August. However, economists claim that excess savings are disproportionately concentrated among households with high incomes. A majority of low-income households are relying on loans to make ends meet because they have depleted their epidemic reserves.
According to most economists, increasing credit card balances do not raise alarming concerns because the labour market still drives consumer spending primarily.
The US stock market opened higher on Monday. Currency baskets showed a decline in the dollar. Notes issued by the US Treasury fluctuated in price.
+ There are no comments
Add yours