Consumer spending in the United States rose more than expected in September, keeping it on a higher growth trajectory as the fourth quarter begins, while monthly inflation also increased. The Bureau of Economic Analysis from the Commerce Department reported on Friday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose by 0.7 percent last month. Data for August was not revised and continued to show a 0.4 percent increase in spending. Economists polled by Reuters had forecast a 0.5 percent rise in spending. This data was included in the third-quarter GDP report published yesterday, which showed a sharp acceleration in consumer spending, contributing to the economy's fastest growth rate in nearly two years.
While the strong growth rate in consumer spending is unlikely to be sustainable, the strong shift in the fourth quarter bodes well for spending amid increasing challenges. Consumer spending is driven by strong wage growth and households drawing from savings accumulated during the COVID-19 pandemic. The Personal Consumption Expenditures (PCE) index rose by 0.4 percent in September after a similar increase in August. Excluding the volatile food and energy components, the PCE index increased by 0.3 percent after rising 0.1 percent the previous month. The so-called core PCE index rose 3.7 percent year-on-year in September, marking the smallest increase in over two years, following a 3.8 percent increase in August.
