Consumers Stay Within Means as US Spending Matches Income
Consumer spending in the United States climbed in October at the same pace as incomes, showing households are staying within their means as the holiday-shopping season begins.
Expenditures increased 0.2% last month after being little changed in September, Commerce Department figures showed Nov. 26. The median forecast of 76 economists in a Bloomberg News survey called for a 0.3% gain. Incomes also rose 0.2%, less than projected.
Bigger wage gains and concern about taking on too much debt potentially could put a lid on how fast consumer spending can accelerate in the final three months of the year. Continued progress in the labor market and relief at the gas pump may help some households find the means to spend as retailers prepare for the holiday-shopping season.
The spending figures “pose a slightly softer starting point to the quarter,” said Jacob Oubina, a senior U.S. economist at RBC Capital Markets in New York, which is the best forecaster of personal spending in the past two years, according to data compiled by Bloomberg. Still, any weakness is likely to be short-lived as “consumers are on the best footing” of the entire expansion, he said, citing confidence, job growth, household balance sheets and savings.
The Bloomberg survey median called for incomes to rise 0.4% after a previously estimated September reading of 0.2%.
The consumption data showed that after adjusting for inflation, which generates the figures used to calculate gross domestic product, purchases rose 0.2% in October after being little changed the month before.
Spending on durable goods, including automobiles, decreased 0.1% after adjusting for inflation following a 1% drop in September. Purchases of nondurable goods, which include gasoline and clothing, increased 0.5%.
Household outlays on services rose 0.1% last month after adjusting for inflation. In addition to health care, the category also includes utilities, tourism, legal help and personal-care items. This typically makes it difficult for the government to estimate accurately in the preliminary report.
The data also showed that prices tied to consumer spending rose 1.4% in the year ended October, the same as in the prior month. Federal Reserve policy makers aim for price increases of 2% a year.
The core price measure, which excludes fuel and food, rose 0.2% in October from the prior month and was up 1.6% from a year ago, the Nov. 26 report showed. That was the biggest 12-month gain since December 2012.
Disposable income, or the money left over after taxes, rose 0.1% last month after adjusting for inflation, the same as in September. It was up 2.5% from October 2013 in real terms.
Wages and salaries increased 0.3% after rising 0.2%. The saving rate held at 5% last month.
