The Commerce Department releases its September report on consumer spending, which accounts for 70 percent of economic activity. The report will be issued at 8:30 a.m. EDT Friday.
SPENDING SLOWS: The expectation is that spending edged up a tiny 0.1 percent in September, according to a survey of economists by data firm FactSet. Economists believe income rose 0.3 percent in September, matching the August gain.
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GAS PRICES DROP: In August, consumer spending rose 0.5 percent from the previous month but the expectation is that spending slowed last month based on activity at retail stores. Retail spending actually fell 0.3 percent last month as purchases of autos, gasoline, furniture and clothing all slowed.
Some of the decline was price-related as the price of gasoline was in retreat last month, a decline that is continuing.
Falling gas prices are a major reason that economists are optimistic about consumer spending in coming months. Lower gas prices mean consumers will have more to spend on other items.
Another reason for optimism is continued strong job growth, which pushed the unemployment rate down to a six-year low of 5.9 percent in September. More people working means more incomes and more fuel to drive consumer spending.
The government reported Thursday that the overall economy, as measured by the gross domestic product, grew at an annual rate of 3.5 percent in the July-September quarter.
Economists believe growth will come in around 3 percent in the current quarter, helped by solid consumer spending. They are also forecasting growth for all of 2015 at 3 percent, which would be the strongest year since 2005, two years before the start of the Great Recession.
Analysts believe after five years of sub-par economic growth, the economy has finally accelerated, helped by solid employment growth.
This week the Federal Reserve decided to end its third round of bond purchases, which have pushed the central bank's balance sheet up by more than $3 trillion over the past six years. The Fed bought the bonds as a way to put downward pressure on long-term interest rates and provide an extra boost to the economy after it had slashed its key short-term rate to a record low near zero.
The central bank retained language indicating it planned to keep its short-term rate low for a "considerable period." Analysts are not looking for the first increase in short-term rates until next June, although Fed officials insist that rate increases will depend on how the economy, including the job market and inflation, perform in coming months.