New numbers show that US consumer spending rose more than analysts expected in September. Households increased motor vehicle purchases and inflation increased consistently and, as such, analysts now have improved their expectations for a Federal Reserve rate hike, in December.
Economists and policy makers now say, even with a few mixed signals from the market, consumers will continue to support growth between now and the end of the year. PNC Financial Services deputy chief economist Gus Faucher says, “With job gains continuing and the labor market further tightening, the U.S. economy should continue to expand well into 2017.”
And Monday’s figures have the support to back it up: automobiles and other big-ticket goods made a big jump in September—durable goods spending improved 1.3 percent last month. Americans, though, might also be saving less. Reports show that personal saving rates fell from 5.8 percent to 5.7 percent over the previous month.
The data on “core prices” improved 0.1 percent over the previous month, showing a 1.7 percent increase from the previous year.
Accordingly, TD Securities macro strategist Brittany Baumann notes, “Today’s report reinforces a positive outlook for both inflation and the consumer.” And now, of course, FED officials are more closely watching various metrics—including inflation, hiring, and household spending—to weigh the potential for setting a new central bank benchmark interest rate.
Oxford Economics head of US macroeconomics, Greg Daco, comments, “The latest data should be of comfort to the Fed. Spending continues to underpin growth and, combined with positive developments on the labor market and inflation, should enable the Fed to tighten policy in December.”
Faucher goes on to say, “Overall inflation is accelerating as energy prices and the U.S. dollar have stabilized since the spring. Stronger wage growth from the tight labor market will also help push up inflation over the medium term.”
Overall, consumer spending improved thanks to 1.3 percent bump in long-lasting manufactured goods purchases, like cars. Service spending increased 0.3 percent.
Finally, Ameriprise Financial Inc senior economist Russell Price comments that good consumer support should help welcome the holiday quarter. He goes on to say, “As long as we continue to see employment growth and wage growth, that’ll put more money in people’s pockets and give them the ability to spend at a faster pace.”