AP Radio AP Radio News:

Nov 30, 11:33 AM EST

US consumer spending, incomes rose in October


AP Photo
AP Photo/Jeff Chiu

Multimedia
A district summary of the Beige Book
Measuring economic stress by county nationwide
Mall malaise: shoppers browse, but don't buy
Unemployment by the numbers
Family struggles with father's unemployment
Saying an affordable goodbye
Hard times hit small car dealer
Latest Economic News
South Korea's Park would leave economy mired in challenges

German factory orders beat forecasts, up strongly in October

Brazil's government proposes setting retirement age at 65

Bank of England chief: Prosperity must be better distributed

Will Italy's political drama spawn a new eurozone crisis?

US services firms grow at fastest pace since October 2015

Lufthansa, GE invest in aircraft engine plant in Poland

Get used to it: Economists see "new normal" of slow growth

Jobs report shows Trump to inherit solid but uneven economy

Unemployment drops for black Americans and high school grads

WASHINGTON (AP) -- U.S. consumers boosted their spending again in October, while their incomes increased at the fastest clip in six months. A key gauge of inflation watched by the Federal Reserve posted the fastest 12-month gain in two years.

Consumer spending increased 0.3 percent in October after a revised 0.7 percent jump in September, the Commerce Department said Wednesday. Incomes increased 0.6 percent, the best showing since April.

An inflation gauge closely followed by the Federal Reserve increased 1.4 percent compared to a year ago. That was the fastest 12-month advance since 2014. The rise was still below the Fed's 2 percent target, but with inflation firming, the Fed is expected to boost a key interest rate next month.

The inflation gain marked the strongest pace since prices had risen 1.5 percent for the 12 months ending in October 2014.

"These readings continue to move closer to the Fed's 2 percent target," said Gregory Daco, senior economist at Oxford Economics.

He predicted inflation would begin to run above 2 percent early next year, influenced in part by President-elect Donald Trump's policies to boost spending and cut taxes.

Because of this, Daco predicted the Fed would be pushed to a slightly faster pace for raising interest rates. He forecast two rate hikes in 2017 and three in 2018.

The 12-month increase in the Fed's preferred inflation target was a tiny 0.3 percent a year ago. That reflected a period when oil prices were plunging. The absence of inflationary pressures has been a key reason the Fed has been slow to boost its benchmark interest rate.

The central bank is widely expected to increase the rate by a quarter-point at its December meeting, a year after it raised rates for the first time in nearly a decade.

With incomes rising faster than spending, the saving rate jumped to 6 percent in October, up from 5.7 percent in September.

The rise in spending reflected a 1 percent increase in purchases of durable goods such as autos and a 1.4 percent rise in spending on nondurable goods. Spending on services such as doctor's visits and utilities fell by 0.2 percent in October.

Spending is closely watched since it accounts for more than two-thirds of economic activity. The overall economy grew at a solid 3.2 percent rate in the July-September quarter. Analysts believe growth will slow to around 2 percent in the current quarter.

---

This headline on this story has been corrected to show that the latest consumer spending report was for October, not September.

© 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.



Latest News