US consumer spending rises at more moderate pace

Bloomberg

Personal spending increased at a more moderate pace in October after the biggest gain in five months, while faster income growth signaled demand will be sustained.
Purchases rose 0.3 percent after a 0.7 percent September advance that was stronger than first estimated, Commerce Department figures showed on Wednesday. The median forecast in a Bloomberg survey called for a 0.5 percent advance in October. Incomes jumped 0.6 percent, the most since April.
Consistent job growth, projected to be reinforced with Friday’s report on November payrolls, and a firming up of wages are allowing households to spend a little bit more freely. The report also showed the Federal Reserve’s preferred inflation gauge climbed to the highest since October 2014.
“The headline piece is the fact that the labor market is so strong and we’re getting really solid income gains,” Stephen Stanley, chief economist at New York-based Amherst Pierpont Securities LLC, said before the report. “The rest of the economy doesn’t look quite as good as the consumer right now, but the consumer is more than able to carry the load for the time being.”
Projections for consumer spending in the Bloomberg survey ranged from gains of 0.2 percent to 0.7 percent. The previous month’s reading was initially reported as a 0.5 percent advance. Wages rose 0.5 percent in October for a second month, exceeding the 0.4 percent median forecast. The gain in worker pay helped propel income growth after a 0.4 percent increase in September that was more than previously reported.
The personal spending report showed the price index tied to consumer purchases increased 0.2 percent for a third month in October. It rose 1.4 percent from a year earlier. This inflation gauge is preferred by Fed policy makers and, while making progress, hasn’t met their 2 percent goal since April 2012.
Disposable income, or the money remaining after taxes, rose 0.4 percent in October from the prior month after adjusting for inflation, the strongest advance this year. The saving rate increased to 6 percent from 5.7 percent in September.
After adjusting for inflation, in order to generate the figures used to calculate gross domestic product, purchases increased 0.1 percent last month after a 0.5 percent advance in September that was stronger than initially estimated, Wednesday’s report also showed. Household outlays on services decreased 0.3 percent after adjusting for inflation, revealing a shortfall in utility use. Last month marked the warmest October since 1963, according to the National Oceanic and Atmospheric Administration.
The services category, which also includes tourism, legal help, health care, and personal care items such as haircuts, is typically difficult for the government to estimate accurately until more information is available
in later months. Inflation-adjusted spending on durable goods rose 1 percent in October after a 2.6 percent surge. Purchases of non-durable
merchandise increased 0.8 percent, the most since April. Stripping out
the volatile food and energy categories, the PCE price measure climbed 0.1 percent for a second month, and 1.7 percent in the 12 months ended in October.
Fed officials are broadly expected to raise their benchmark interest rate in December for the first time this year as they monitor still-solid labor-market gains and hints of firming price growth.