U.S Consumer Spending Rises Most in 8 Years

U.S. consumer spending rose in September by the most since August 2009 as motor vehicle purchases surged in the aftermath of two hurricanes, Commerce Department figures showed Monday. Stagnant inflation-adjusted incomes and the smallest saving rate in almost a decade indicate outlays may cool.

HIGHLIGHTS OF INCOME AND SPENDING (SEPTEMBER)

  • Purchases rose 1% from prior month (est. 0.9% gain) after a 0.1% increase
  • Incomes rose 0.4% (est. 0.4% gain) after 0.2% increase
  • Price gauge tied to consumption rose 0.4% from previous month (matching est.); was up 1.6% from year ago
  • Excluding food and energy, prices rose 0.1% (matching est.); so-called core was up 1.3% from year ago
  • Saving rate fell to 3.1 percent in September, the smallest since December 2007, from 3.6 percent
  • Key Takeaways

    The jump in September outlays was driven by purchases of durable goods including the replacement of motor vehicles lost in recent flooding from hurricanes. That means the latest surge probably overstates the strength of consumer spending.

    The last time spending rose as much was in mid-2009 when auto purchases were fueled by a federal government incentive program called “cash-for-clunkers.”

    Meanwhile, real disposable income was flat after a 0.1 percent decline in August. While consumers are getting support from steady hiring, higher home values, stock-market gains and still- low inflation, a sustained pickup in wages would help them further boost purchases.

    A government report on Friday showed household spending increased at an annualized 2.4 percent rate in the third quarter after a 3.3 percent pace during the previous three months.

    The figures on prices showed inflation only inched up toward the Federal Reserve’s 2 percent goal. The central bank’s preferred inflation gauge has missed the Fed’s target for most of the past five years.

    Other Details

  • Wages and salaries rose 0.4 percent following a 0.1 percent increase
  • Adjusted for inflation, purchases rose 0.6%, the biggest gain since March, after a 0.1% decline
  • Spending on durable goods rose 3.5 percent after adjusting for inflation after a 1.4 percent decline in August
  • Outlays on services rose 0.3 percent, while spending on non- durable goods also advanced 0.3 percent
  • Bloomberg

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    Dean Popplewell

    Dean Popplewell

    Vice-President of Market Analysis at MarketPulse
    Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
    Dean Popplewell