Consumer spending increased solidly in September, but higher prices are beginning to bite, as inflation remains hot amid shortages of cars and other goods in the face of global supply constraints.
The Commerce Department said on Friday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.6 percent last month. Data for August was revised higher to show spending rebounding 1 percent instead of 0.8 percent as previously reported.
Economists polled by Reuters had forecast consumer spending increasing 0.5 percent. A resurgence in Covid-19 cases over summer, driven by the delta variant, worsened worker shortages at factories, mines and ports, further stressing supply chains. Outside the shutdown in spring 2020, which severely depressed output, the third quarter was the worst period for motor vehicle production since early 2009 because of a global shortage of semiconductors. Auto inventories have been run down and some shelves are bare, curbing spending and boosting prices.The personal consumption expenditures price index, excluding the volatile food and energy components, climbed 0.2 percent after gaining 0.3 percent in August.
The core PCE price index is the Federal Reserve’s preferred inflation measure for its flexible 2 percent target. The Fed is expected to announce at next week’s policy meeting that it will start reducing the amount of money it is pumping into the economy through monthly bond purchases.
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