Consumer spending rose in October despite a surge of inflation as higher personal incomes helped buffet rising prices, according to data released Wednesday by the Commerce Department.
Personal consumption expenditures rose 1.3 percent last month, powered by a 1 percent increase in spending on goods and a 0.7 percent rise in spending on services. Consumer spending on goods has run far ahead of services due to a combination of supply chain snarls, coronavirus-related restrictions and changes in consumption habits driven by the pandemic.
The national shopping spree stretched through October even as the personal consumption expenditures (PCE) price index — the Federal Reserve’s preferred gauge of inflation — jumped notably last month.
“The combo of reduced virus concerns and warm weather, easing auto supply chain constraints and an early start to the holiday season boosted consumer outlays in October,” wrote Gregory Daco of Oxford Economics in a Wednesday analysis.
“Still, all wasn’t rosy for US households as they had to contend with higher inflation, reduced product availability and diminished fiscal support,” Daco wrote.
The PCE index rose 0.6 percent in October after three straight months of 0.4 percent increases in consumer prices. The index also rose 5 percent during the year leading into October — a 0.6 percentage point increase in the annual inflation rate from September.
Rising wages and accelerating job growth helped power consumer spending past inflation, with personal incomes rising 0.5 percent last month. Even so, disposable personal income fell 0.3 percent when adjusted for inflation.
“Strong spending might continue to add pressure on prices in the last two months of the year. But recent data has been showing an improvement in the supply chain snarl that can play a role in easing such pressures,” wrote Tuan Nguyen, U.S. economist at accounting firm RSM.
“Overall, Wednesday’s data reaffirmed our forecast of a better-than-expected holiday season that will feed into growth for the last quarter of the year.”