U.S. consumer spending tepid as households boost savings

WASHINGTON Fri Nov 8, 2013 8:41am EST

Customers shop at Toys R Us in New York November 24, 2011. REUTERS/Eric Thayer

Customers shop at Toys R Us in New York November 24, 2011.

Credit: Reuters/Eric Thayer

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WASHINGTON (Reuters) - U.S. consumer spending increased modestly in September as households boosted their savings and inflation remained benign, pointing to sluggish domestic demand.

The Commerce Department said on Friday consumer spending rose 0.2 percent after advancing 0.3 percent in August.

Economists polled by Reuters had expected consumer spending, which accounts for about 70 percent of U.S. economic activity, to gain 0.2 percent in September.

The data was included in Thursday's third-quarter gross domestic product report.

Inflation stayed muted in September, a potential source of concern for Federal Reserve officials. A price index for consumer spending nudged up 0.1 percent, rising by the same margin for three consecutive months.

Over the past 12 months, prices rose 0.9 percent, the smallest advance since April. The index had increased 1.1 percent in August.

Excluding food and energy, the price index for consumer spending also rose 0.1 percent for a third straight month. Core prices were up 1.2 percent from a year ago, after rising by the same margin in August.

Both inflation measures continue to trend below the Fed's 2 percent target. That, combined with the lackluster consumer spending, would argue against the U.S. central bank trimming the $85 billion in bond purchases it is making each month to keep interest rates low.

In September, income rose 0.5 percent after rising by the same margin in August. With spending lagging income growth, the saving rate - the percentage of disposable income households are socking away - rose to 4.9 percent. That was the highest since December last year.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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Comments (6)
longtail wrote:
U.S. consumers would be very wise to increase savings in the run up to the January Republican shutdown/default. The economy will be held hostage as long as Republicans have the power to bring it down.

Nov 08, 2013 8:55am EST  --  Report as abuse
Overcast451 wrote:
Yes indeed, I’m paying down debt and saving.

I’ll have to think of something else for this Christmas; with healthcare up $100.00 a month and getting soaked in other ways, I need to really tighten down and pay off even more debt.

Even looking for a part-time job right now.

So sorry retail; I need a job – not to shop! lol
I bet retail will suffer big time this holiday season, I’m sure we aren’t the only ones in this situation.

And it’s not just the GOP – don’t be a partisan fool. Both parties have created this mess over many years – it didn’t happen overnight.

Nov 08, 2013 9:40am EST  --  Report as abuse
Overcast451 wrote:
Yes indeed, I’m paying down debt and saving.

I’ll have to think of something else for this Christmas; with healthcare up $100.00 a month and getting soaked in other ways, I need to really tighten down and pay off even more debt.

Even looking for a part-time job right now.

So sorry retail; I need a job – not to shop! lol
I bet retail will suffer big time this holiday season, I’m sure we aren’t the only ones in this situation.

And it’s not just the GOP – don’t be a partisan fool. Both parties have created this mess over many years – it didn’t happen overnight.

Nov 08, 2013 9:40am EST  --  Report as abuse
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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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