Consumer spending inches up in October as cautious Americans save more
Shoppers are seen outside Macy’s Herald Square in midtown Manhattan on Nov. 20.
Consumer spending inched up last month, rising at a rate well below expectations, as cautious Americans saved more of their growing incomes, the Commerce Department said Wednesday.
Personal consumption expenditures increased just 0.1% for the second straight month. Economists had expected a 0.3% increase.
The slow pace of spending by consumers -- a category that accounts for about two-thirds of U.S. economic activity -- could be a warning sign to Federal Reserve policymakers as they consider whether to hike a key interest rate next month.
SIGN UP for the free California Inc. business newsletter >>
But consumers also could have started saving in anticipation of the holiday spending season.
In a positive sign, personal income jumped 0.4% in October, twice the pace of growth of the previous month.
Americans, however, kept much of that money in their pockets and bank accounts. The portion of disposable income that was saved jumped to 5.6%, from 5.3% the previous month.
The saving rate last month was the highest since December 2012, when consumers socked away 11% of their disposable income because of fears of the pending fiscal cliff combination of tax hikes and government spending cuts.
Wednesday’s report also showed inflation edging up, but still extremely low.
The price index for personal consumption expenditures, the Fed’s preferred inflation indicator, increased 0.1% in October after a 0.1% drop the previous month.
For the 12 months ended Oct. 31, prices increased 0.2%, well below the Fed’s annual target of 2%.
Excluding volatile food and energy prices, the annual inflation rate was 1.3%.
Wednesday’s report will be the last on the Fed’s preferred inflation measure before central bank policymakers are set to meet next month to consider an increase in the short-term federal funds rate.
With the jobs market continuing to improve, Fed officials have strongly signaled they could nudge the rate up for the first time in nearly a decade. The rate has been near zero since late 2008 in an attempt to stimulate spending.
But some Fed policymakers are worried that the economy still isn’t strong enough and that inflation remains too low.
Follow @JimPuzzanghera on Twitter
ALSO
Watch Jeff Bezos’ reusable rocket return to Earth
Longer waits at the checkout counter? Blame credit cards with chip technology
