Consumer spending jumped last month as Americans’ incomes continued to rise, the Commerce Department said Tuesday.
Personal consumption expenditures rose 0.6% in November, the biggest increase in three months. The figure, which was 0.1 percentage points higher than economists had forecast, followed a 0.3% increase in October.
Consumers had more money in their wallets as personal income rose 0.3% for the second straight month. Economists had expected incomes to rise even more, to 0.5%.
With spending outpacing incomes, the personal saving rate dropped to 4.4% in November, from 4.6% the previous month.
Sharply lower gas prices are giving consumers more spending money and improving their outlook.
In another positive sign for the economy, the University of Michigan and Thomson Reuters said Friday that their closely watched consumer confidence index rose in December to its highest level since 2007.
It was the fifth straight month that the final consumer confidence reading has risen, as job creation has accelerated and economic growth has strengthened.
Fueled by stronger consumer spending, the U.S. economy grew at a 5% annual rate in the third quarter, its best performance since 2003, the Commerce Department said Tuesday.
Consumer spending, including monthly mortgage payments that are not part of the monthly government figures, accounts for about two-thirds of the nation’s economic activity.
Despite the stronger spending, inflation remained low, the Commerce Department said.
The personal consumption expenditure price index, which is the Federal Reserve’s preferred inflation gauge, fell 0.2% in November. For the 12-month period that ended Nov. 30, prices were up 1.2%, well below the Fed’s annual target of 2%.
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