Consumer spending rose solid 0.3 per cent in October - InfoNews

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Consumer spending rose solid 0.3 per cent in October

FILE - In this Thursday, Nov. 23, 2017, file photo, people line up to check out as they shop a Black Friday sale at a Best Buy store on Thanksgiving Day, in Overland Park, Kan. On Thursday, Nov. 30, 2017, the Commerce Department issues its October report on consumer spending, which accounts for roughly 70 percent of U.S. economic activity. (AP Photo/Charlie Riedel, File)
November 30, 2017 - 9:00 AM

WASHINGTON - Consumers boosted their spending a solid 0.3 per cent in October, while their incomes grew 0.4 per cent. Both were healthy gains indicating the all-important holiday shopping season was getting off to a good start.

The October increase in consumer spending followed a much larger 0.9 per cent rise in September, the Labor Department reported Thursday. The September climb had been the biggest in eight years. The rise in incomes last month matched the September result, with both months showing the best performance since February.

The October gain in spending after the surge in September was viewed as evidence of good momentum behind consumer spending, which accounts for 70 per cent of economic activity, at the start of the fourth quarter.

"The economy is at full employment and more workers means more paychecks to be spent at the shops and malls," said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.

A key measure of inflation rose 1.6 per cent over the last 12 months. That is still below the Federal Reserve's target for inflation of annual price increases of 2 per cent and represented a slip from a 12-month gain of 1.7 per cent in September.

Inflation has been below the Fed's 2 per cent target for more than five years. Federal Reserve Chair Janet Yellen told a congressional committee this week that there were good reasons for the decline before this year — a deep recession, a strong dollar holding down import prices and a big fall in oil prices. But she said the shortfall in inflation this year was something of a mystery.

However, she maintained that she still believed inflation would resume rising toward the Fed's 2 per cent goal. The central bank is expected to hike its key policy rate for a third time when it meets in December.

The 0.3 per cent rise in consumer spending came despite the fact that spending on durable goods such as autos actually fell 0.1 per cent last month. That decline was offset by a 0.2 per cent increase in spending on nondurable goods — items such as clothing and food not expected to last three years — and a 0.3 per cent increase in spending on services, a category that covers such things as doctor's visits and utility bills.

The personal saving rate rose to 3.2 per cent of after-tax income in October, up from 3 per cent in September.

After a lacklustre start to the year, the overall economy picked up in the spring with growth, as measured by the gross domestic product, rising at 3.1 per cent rate in the second quarter and 3.3 per cent in the third quarter. It marked the first back-to-back quarterly gains above 3 per cent in three years. Economists believe growth will slow a bit in the current October-December quarter but still remain close to 3 per cent.

News from © The Associated Press, 2017
The Associated Press

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