(Reuters) – U.S. consumer spending slowed in October, a sign of weakening demand, while the year-on-year rise in inflation was the weakest since the start of 2021.
Data released Thursday by the Commerce Department showed that consumer spending in the United States, which represents more than two-thirds of the country’s economic activity, increased in October by 0.2% on an adjusted basis, compared to an increase by 0.7% in September.
This data is in line with the expectations of analysts surveyed by LSEG.
The slowdown in consumer spending follows a strong pace of growth in the third quarter and reflects the impact of rising borrowing costs and the depletion of excess savings among low-income households.
Although wages remain high, the rate of increase has slowed compared to the start of the year with the weakening of the labor market.
Millions of Americans resumed paying their student loans last month, which could dampen spending next year. Furthermore, fears that the economy could slide into recession at the start of 2024 could encourage households not to spend and favor savings.
So far, the US economy has defied predictions of recession, with robust growth of 5.2% annualized in the third quarter, the strongest in almost two years.
INFLATION FLASH
Growth estimates for the fourth quarter are mostly below 2%. The majority of economists expect the economy to settle into a period of very slow growth and avoid an outright recession.
The PCE consumer price index, an indicator of price developments favored by the Federal Reserve, remained unchanged in October over a month after increasing 0.4% in September.
Over one year, it is up 3% after +3.4% the previous month, i.e. its lowest year-on-year increase since March 2021.
The basic “core PCE” inflation index, which excludes the volatile elements of energy and food products, increased by 0.2% over one month and by 3.5% over one year, in line with expectations.
(Report by Lucia Mutikani; by Gaëlle Sheehan, edited by Blandine Hénault)
Copyright © 2023 Thomson Reuters
I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.
