WASHINGTON, Dec 21 (Reuters) – U.S. consumer spending increased solidly in November as households bought motor vehicles and spent more on utilities, but wage growth remained moderate suggesting the current pace of consumption was unlikely to be sustained.
The Commerce Department said on Friday consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.4 percent last month also boosted by outlays on recreation. Data for October was revised up to show spending surging 0.8 percent instead of the previously reported 0.6 percent rise.
Economists polled by Reuters had forecast consumer spending increasing 0.3 percent in November. When adjusted for inflation, consumer spending rose 0.3 percent last month after jumping 0.6 percent in October.
Strong consumer spending is seen blunting the hit on the economy from a deteriorating trade deficit, a weakening housing market and slowing business investment on equipment. Growth estimates for the fourth quarter are currently around a 2.9 percent annualized rate. The economy grew at a 3.4 percent pace in the July-September quarter.
In November, spending on goods increased 0.4 percent after surging 0.9 percent in October. Outlays on services climbed 0.4 percent after shooting up 0.7 percent the prior month.
Inflation pressures remained moderate in November. The personal consumption expenditures (PCE) price index excluding the volatile food and energy components edged up 0.1 percent, matching October’s gain.
That lifted the year-on-year increase in the so-called core PCE price index to 1.9 percent from an eight-month low of 1.8 percent in October.
The core PCE index is the Federal Reserve’s preferred inflation measure. It hit the U.S. central bank’s 2 percent inflation target in March for the first time since April 2012.
The U.S. central raised interest rates on Wednesday for the fourth time this year, but forecast fewer rate hikes next year and signaled its tightening cycle is nearing an end in the face of financial market volatility and slowing global growth.
The Fed slightly lowered its inflation projections for 2019.
Last month, personal income rose 0.2 percent after increasing 0.5 percent in October. Incomes were held back by a 0.4 percent drop in dividend payments. There were also declines in social security benefit payments.
Wages rose 0.2 percent in November after increasing 0.4 percent in October. Savings fell to $944.2 billion last month, the lowest since December 2017, from $962.9 billion in October. (Reporting By Lucia Mutikani; Editing by Andrea Ricci) (([email protected]; 1 202 898 8315; Reuters Messaging: [email protected]))
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