Rising Inflation, Higher Prices Push Spending Up As Incomes Fall

inflation, budgeting

Inflation is continuing to weigh on consumers as higher prices inched September spending up by 0.6 percent and household incomes dropped 1% as stimulus funds and enhanced unemployment ended, the Bureau of Economic Analysis reported on Friday (Oct. 29).

Consumer spending in August increased by 1%. The personal consumption expenditures (PCE) price index went up 0.3% in September, the same as August. The PCE is the inflation marker closely eyed by the Federal Reserve.

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September’s PCE is up 4.4% from last year, energy prices are up 24.9% and the cost of food increased 4.1%. Leaving out food and energy, September’s PCE is up 3.6% from the same time in 2020.

The spending outlook is expected to rebound as the holiday shopping season takes hold, and new cases of COVID-19 continue declining.

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“It’s a temporary pause in what’s otherwise a very robust spending outlook,” Joe Brusuelas, chief economist at RSM US LLC, told The Wall Street Journal.

Purchases of durable goods like motor vehicles fell 0.2%, while spending on services like personal grooming and travel went up 0.9%. A shortage of goods related to supply chain disruptions is considered the likely culprit in the fall-off of purchases.

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Travel was up in the week that ended Oct. 27, according to numbers from the Transportation Security Administration (TSA) cited by The Wall Street Journal. The number of people being processed at TSA checkpoints was 81% of the same time frame in 2019 and up from 71 percent in the middle of last month.

Seated restaurant dining for the week that ended Oct. 27 was roughly 5% lower than in 2019, Open Table data showed, per WSJ.