Consumer spending in the U.S. rose higher than expected in September, households raised purchases of motor vehicles while inflation slowly increased. This could push for an interest rate hike from the Federal Reserve in December.
The Commerce Department reported on Monday that consumer spending (70 percent of U.S. economic activity), increased 0.5 percent after a down revised 0.1 percent drop in August. The report was published ahead of the Fed’s two day policy meeting on Tuesday. The U.S. central bank is not expected to raise rates but may increase borrowing costs in December. Market analysts at Reuters had predicted consumer spending rising to 0.4 percent last month.
Consumer spending rose 0.3 percent after the 0.2 percent in August with inflation adjustments. The spending statistics were implemented into last Friday’s report on q3 gross domestic product (GDP). Consumer spending has increased at a 2.1 percent annual pace after pushing 4.3 percent rate in the prior period. A rise in soybean exports, a reversal in inventory investment, and consumer spending had boosted economic growth to 2.9 percent in the third quarter. The economy grew 1.4 percent from April to June.
The personal consumption expenditures (PCE) price index increased 0.2 percent. The PCE price index has risen 1.2 percent from October 2015 to September 2016. The core PCE is running below the Fed’s 2 percent expectation. Consumer spending last month raised by 1.3 percent in purchases of manufactured goods such as automobiles. Personal income increased 0.3 percent, wages and salaries raised 0.3 percent while savings fell to $797.8 billion from $820.5 billion in August.