The U.S. economy is posting another quarter of solid growth.
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Americans' spending grew 0.3% in October after rising 0.9% -- the quickest pace in eight years -- the prior month, the Commerce Department said Thursday. Households also got another big boost in their incomes, which rose 0.4% for the second-consecutive month.
Household spending is the biggest source of economic demand in the U.S. The figures suggest the economy entered the fourth quarter still growing faster than its roughly 2% annual average of the current expansion. Output grew at a 3.3% annual rate in the third quarter and at a 3.1% clip in the summer. Many economists are projecting growth of between 2.5% and 3% in the fourth quarter, putting the U.S. in reach of a milestone: Three consecutive quarters of above-3% growth for the first time since 2004-2005.
"In general the economy is solid," Oxford Economics economist Gregory Daco said. "We're still an economy that's making progress."
The steady growth raises complicated questions about how much stimulus the economy needs as Republicans in Congress move toward passing a tax-cut package.
The economy is being fueled by low unemployment, steady job growth, a rise in business investment and a booming stock market that has lifted household spirits and in turn their willingness to spend.
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Last month's spending increase reflected higher spending on goods like prescription drugs, as well as on services like airfares for foreign travel, the Commerce Department said.
One caveat: Much of the overall increase was due to Americans' paying higher prices for goods and services. Adjusted for inflation, consumer spending rose a softer 0.1% in October. And in another potentially worrisome sign, Americans' rate of savings remains low after a big drop over the past two years. The savings rate stood at 3.2% in October, up just a touch above September's 3% figure, which was the lowest rate of savings since November 2007.
Economists say lower savings gives Americans less of a financial cushion should the economy hit a rough patch.
The Commerce Department added that spending and income data in recent months have been skewed by hurricanes Harvey and Irma, which tore through Texas and Florida this summer. The Commerce Department said the storms affected the data for August and September, though it couldn't say by how much.
Thursday's report showed inflation pressures remain sluggish. The price index for personal-consumption expenditures -- the Federal Reserve's preferred inflation gauge -- rose 0.1% in October, the smallest gain since July. So-called core prices, which strip out food and energy components, increased 0.2%, matching September's growth and a touch higher than gains earlier this summer.
In the 12 months through October, overall prices rose 1.6%, down from September's annual rate of 1.7%. Core prices gained 1.4% in October from a year earlier, matching September's pace.
The Fed targets annual inflation of 2%. Despite the soft inflation, the strong spending figures could nudge the Fed closer to raising short-term interest rates in December.
Write to Josh Mitchell at firstname.lastname@example.org
(END) Dow Jones Newswires
November 30, 2017 11:10 ET (16:10 GMT)