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% in October after a revised 0.7% jump in September, the Commerce Department said Wednesday. Incomes increased 0.6%, the best showing since April.
An inflation gauge closely followed by the Federal Reserve increased 1.4% compared with a year ago. That was the fastest 12-month advance since 2014. The rise was still below the Fed's 2% 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% for the 12 months ending in October 2014.
By comparison, the 12-month increase a year ago was a tiny 0.3% during a time 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. But with prices rising, 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% in October, up from 5.7% in September.
The rise in spending reflected a 1% increase in purchases of durable goods such as autos and a 1.4% rise in spending on nondurable goods. Spending on services such as doctor's visits and utilities fell by 0.2% 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% rate in the July-September quarter. Analysts believe growth will slow a bit to around 2% in the current quarter.