PYMNTS-MonitorEdge-May-2024

Consumers’ Spending Blows Past September Estimates

U.S. consumer spending saw its largest increase in more than eight years in September, buoyed by the replacement of flood-damaged vehicles in Texas and Florida, according to a Monday (Oct. 30) Reuters report.

While consumers spent more in September 2017 than in years past, inflation rates remain muted. Meanwhile, it appears consumers did take from their savings to bankroll their personal consumption expenditures (PCE), resulting in savings reaching its lowest level since 2008, the article noted. Given the combination of low wage growth rates and the decline in savings rates, the level of spending seen in September isn’t likely to last.

“Relying on consumer savings to move the economy forward is not going to last for long,” said Chris Rupkey, chief economist at Mitsubishi UFJ Financial Group (MUFG) in the interview with Reuters.

The U.S. Commerce Department reported Monday (Oct. 30) that PCE consumer spending increased 1 percent in September, a notable increase compared to a 0.1 percent gain in August. Economists had expected consumer spending to jump 0.8 percent in September, noted Reuters. In addition, the Federal Reserve will kick off a two-day policy meeting on Tuesday (Oct. 31). Investors are also waiting to hear who the new Federal Reserve chairman will be, an announcement which is expected to come sometime this week.

The data from the Commerce Department comes just days after it reported the U.S. economy, as measured by gross domestic product (GDP), managed to grow significantly in the third quarter.

According to news from the Wall Street Journal and data gathered by the Commerce Department, the U.S. GDP was up 3 percent on an annual basis for the three months ending in September, a number which beat the consensus estimate of economists polled by the WSJ. The latest tally follows a 3.1 percent rate logged in the second quarter, representing a slight decline.

The growth in the U.S. economy came despite the impact of two major, late summer hurricanes — Hurricane Harvey in Texas and Hurricane Irma in Texas, which posed a sizable negative impact on the southern U.S. through August and September.

PYMNTS-MonitorEdge-May-2024