U.S. Consumer Spending Modest Despite Low Prices

Nov. 1, 2010
Expenditure rose a meager 0.2%

Consumer spending rose only slightly in September, official figures showed on Nov. 1, despite low prices, as incomes fell.

Personal consumption expenditure rose a meager 0.2% during the month, as government transfers fell after a surge in emergency unemployment benefits in August.

A 0.2% fall in income does augur well for a return to economy-boosting spending, according to analysts at Briefing.com. "Since consumption has a direct relationship with the amount of income a consumer has to spend, lower incomes will cause consumption growth to be weak," they told clients.

Wages remained under pressure as unemployment stubbornly hovers near 10%.

Core inflation, excluding volatile food and energy prices, increased by less than 0.1% during the month and below the Fed's unofficial target band for annualized increases.

"Inflation remained subdued as core PCE (Personal Consumption Expenditure) prices were unchanged from August. Year-over-year prices have only increased 1.2%, well below the Fed target of 1.5% to 2% growth."

Ian Shepherdson of High Frequency Economics described the figures as "soft but not disastrous" as the third quarter "ended on a relatively weak note."

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