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US consumer spending rises moderately; inflation muted

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WASHINGTON: US consumer spending increased marginally in September while wages were unchanged, which could cast doubts on consumers’ ability to continue driving the economy amid a deepening slump in business investment.


The report from the Commerce Department on Thursday also showed inflation was muted last month. The data came a day after the Federal Reserve cut interest rates for the third time this year, but signalled a pause in the easing cycle that started in July when it reduced borrowing costs for the first time since 2008.


Fed Chair Jerome Powell said he expected the economy to continue on a moderate growth path, driven by “solid household spending and supportive financial conditions.”


Consumer spending, which accounts for more than two-thirds of US economic activity, gained 0.2 per cent last month as households stepped up purchases of motor vehicles and spent more on healthcare, the government said.


Data for August was revised up to show consumer spending climbing 0.2 per cent instead of the previously reported 0.1 per cent rise. Last month’s increase in consumer spending was in line with economists’ expectations. Consumer spending has slowed since jumping 0.5 per cent in July.


The data was included in the gross domestic product report for the third quarter, which was published on Wednesday.


The government reported that growth in consumer spending slowed to a still-healthy 2.9 per cent annualised rate last quarter after surging at a 4.6 per cent pace in the second quarter, the fastest since the fourth quarter of 2017. That softened some of the blow on the economy from the second straight quarterly contraction in business investment.


The economy grew at a 1.9 per cent rate in the third quarter after expanding at a 2.0 per cent pace in the April-June period.


Inflation was tame in September. Consumer prices as measured by the personal consumption expenditures (PCE) price index were unchanged for a second straight month in September as the cost of energy goods and services dropped 1.3 per cent.


In the 12 months through September, the PCE price index increased 1.3 per cent after rising 1.4 per cent in the 12 months through August. Excluding the volatile food and energy components, the PCE price index was also unchanged last month after gaining 0.1 per cent in August. That lowered the annual increase in the so-called core PCE price index to 1.7 per cent in September from 1.8 per cent in August. — Reuters


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