Consumer Spending Rebounds, Income Rises Modestly

Features Reuters

U.S. consumer spending rebounded in October, suggesting some resilience in the economy at the start of the fourth quarter. The Commerce Department said on Wednesday consumer spending increased 0.2 percent last month after being flat in September.

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Consumer spending, which makes up more than two-thirds of U.S. economic activity, was previously reported to have declined 0.2 percent in September.

Economists polled by Reuters had forecast consumer spending rising 0.3 percent last month. When adjusted for inflation, consumer spending also rose 0.2 percent after being flat in September.

Extremely low gasoline prices as well as a strengthening labor market are supporting consumer spending, which should help to shield the economy from slowing growth in China and the euro zone, as well as a recession in Japan.

The government reported on Tuesday that the economy grew at a 3.9 percent annual pace in the third quarter. Income rose a modest 0.2 percent in October after a similar gain in the prior month. With income growth matching consumer spending, the saving rate was unchanged at 5.0 percent.

The moderate pace of consumer spending, combined with weak gasoline prices, kept inflation under wraps. A price index for consumer spending edged up 0.1 percent after a similar gain in September.

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In the 12 months through October, the personal consumption expenditures (PCE) price index rose 1.4 percent after advancing by the same margin in September.

Excluding food and energy, prices rose 0.2 percent after gaining 0.1 percent in September. The so-called core PCE price index increased 1.6 percent in the 12 months through October, the largest gain since December 2012.

Both price measures continue to run below the U.S. central bank's 2 percent inflation target.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)