U.S. Personal Spending, Prices Rise in Line With Forecasts
(Bloomberg) -- U.S. personal spending rose at a steady pace in September, reflecting further growth in outlays for services and suggesting modest momentum for the economy heading into the fourth quarter.
A closely watched measure of inflation climbed in line with forecasts. Personal income, meanwhile, fell 1% as government transfer receipts plunged. As a result, the saving rate dropped to 7.5%, the lowest since December 2019.
Purchases of goods and services, unadjusted for changes in prices, increased 0.6% following an upwardly revised 1% gain in August, Commerce Department figures showed Friday. The personal consumption expenditures price gauge, which the Federal Reserve uses for its inflation target, rose 4.4% from September 2020.
The median estimate in a Bloomberg survey of economists called for a 0.6% month-over-month increase in total spending and a 4.4% year-over-year rise in the price index.
Adjusting last month’s gain for inflation, spending rose 0.3%, capping the weakest quarter for household outlays in the pandemic recovery. Supply chain bottlenecks and rising prices have challenged consumers and companies alike as inventories continue to shrink.
Shortages of materials and labor, sparked by a snapback in demand as the nation emerged from pandemic lockdowns, have pushed prices higher and hurt Americans’ buying power.
On Thursday, the government said third-quarter economic growth slowed to the softest pace of the recovery as snarled supply chains and a surge in Covid-19 cases throttled spending and investment.
Inflation-adjusted spending on merchandise edged up 0.1% in September, while outlays for services rose 0.4% for a second month, the report showed.
The core price index, which excludes food and energy, rose 3.6% from a year ago, matching the gains of the prior three months and the highest since 1991.
In earnings calls in recent weeks, companies including food giant Unilever Plc and Procter & Gamble Co. have noted that inflationary pressures are likely to continue into next year due to supply chain constraints.
“We don’t see the raw material or the inflation environment slowing down in any way,” said Monish Patolawala, chief financial officer of 3M Co., during an earnings call this week. “Right now, I think we are comfortable with the price increases that we have taken but we’re going to keep doing it as long as we need to.”
Fed policy makers, who meet next week to discuss the course of monetary policy, will probably announce they are ready to begin scaling back their $120 billion in monthly asset purchases.
The Commerce Department’s data also showed personal incomes dropped because of a 7% decrease in transfer payments from the government that reflected the end of federal expanded unemployment benefits on Sept. 6.
Wages and salaries, however, climbed 0.8% in September and marked the seventh straight increase.
Disposable personal income, or after-tax income adjusted for inflation, slumped 1.6% in September, the biggest drop in four months.
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