US Spending Jumps $113 Billion in September, But Inflation Bites Hard
US consumer spending grew by $113.1 billion in September, but high inflation limited real growth to less than 0.1%.
Despite the persistent pressure of rising prices, US consumer spending saw a significant uptick in September. According to the latest data released by the US Bureau of Economic Analysis (BEA), personal consumption expenditures (PCE) surged by $113.1 billion, marking a 0.5 per cent increase for the month.
The Inflation Gap: Nominal vs. Real Growth
While the headline figure of $113.1 billion suggests a robust increase in spending, a closer look reveals a more complex story. When adjusted for inflation, the "real" growth in consumer spending was marginal, rising by less than 0.1 per cent. This stark difference highlights how much of the increased spending was simply a result of consumers paying more for the same volume of goods and services due to elevated prices.
Where Did the Money Go?
The BEA's breakdown of the spending increase shows a clear preference for services over physical products:
- Spending on Services: Increased by $78.1 billion.
- Spending on Goods: Increased by $35.1 billion.
Overall personal outlays—which encompass consumer spending alongside personal interest and current transfer payments—rose by $113.0 billion during the month.
Income and Savings Trends
The rise in expenditures was supported by a modest growth in earnings. Personal income climbed by $54.5 billion, or 0.2 per cent, in September. This growth was primarily driven by increases in government social benefits and general compensation.
Furthermore, disposable personal income—the amount remaining after taxes—rose by $52.7 billion, a 0.2 per cent increase. In terms of financial cushions, personal savings stood at $911.1 billion, with the personal saving rate recorded at 3.8 per cent of disposable personal income.
Inflation Remains a Persistent Challenge
The data underscores that inflation continues to be a significant hurdle for the US economy. The PCE price index, which tracks the costs paid for various goods and services, rose by 0.5 per cent in September compared to the previous month. On a year-on-year basis, inflation remained high at 3.6 per cent.
Core Inflation Metrics
To get a clearer picture of price trends by removing volatile sectors, the BEA tracks "Core PCE inflation," which excludes food and energy prices. This metric showed:
- A month-on-month increase of 0.3 per cent.
- A year-on-year increase of 3.1 per cent.
As policymakers keep a close watch on consumer demand and price pressures, these figures serve as a critical barometer for the health of the US household. The BEA is scheduled to release the next set of data regarding personal income and outlays for October on November 25.