Consumer Finance

Consumer Spending Increases 0.3 Pct; Inflation Steady In August

Data released Friday (Sept. 28) shows that U.S. consumer spending grew in August by 30 basis points, as estimated by the Commerce Department. Inflation continued to hold at the 2 percent target rate as held by the Federal Reserve, CNBC reported on Sept. 28. The reported gains matched expectations by economists coming into the report.

As has been widely reported, and as recounted by the site, consumer spending accounts for roughly two thirds of economic activity in the United States. The 30 basis point gain seen last month comes on top of a 40 basis point gain in July. In reference to what was beneath the last month’s gain, healthcare expenditures helped offset a decline in consumers’ purchases of motor vehicles.

Broken down a bit, consumer spending on goods was up 30 basis points, where a tailwind came from higher gas prices. Spending on services rose by 40 basis points, which includes the aforementioned healthcare spending.

It should be noted that when the headline numbers were adjusted for inflation, consumer spending was up 20 basis points, and the previous month’s consumer spending tally came to 30 basis points.

In reference to the larger backdrop of GDP growth, the economy grew at a pace that is 4.2 percent annualized, again powered by consumer spending, and where a rush to export soybeans ahead of the U.S./China trade war also boosted growth over the summer. The third quarter estimates stand at 2.8 percent annualized, according to CNBC, per economists’ projections.

Price gains moderated in August, reported Reuters, as the personal consumption expenditures (or PCE) price index, which excludes food and energy prices and can be volatile, was unchanged from previous readings.

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