US consumer spending soars in October and inflation accelerates

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US consumer spending soars in October and inflation accelerates




FILE PHOTO: Shoppers carry bags of purchased merchandise at the King of Prussia Mall in Pennsylvania, United States


© Reuters/Mark Makela
FILE PHOTO: Shoppers carry bags of purchased merchandise at the King of Prussia Mall in Pennsylvania, United States


WASHINGTON, Nov 24 (Reuters) – US consumer spending rose more than expected in October as households bought motor vehicles and a host of other goods, still showing no signs of holding back due to high inflation and boosting the economic outlook at the beginning of the fourth quarter.

The Commerce Department reported Wednesday that consumer spending, which accounts for more than two-thirds of US economic activity, rose 1.3% last month, after rising 0.6% in September.

Spending was partially driven by higher prices as demand continues to outpace supply.

Economists polled by Reuters had forecast consumer spending to advance 1.0%.

The simultaneous recovery of global economies from the COVID-19 pandemic, fueled by trillions of dollars of aid from governments, has strained supply chains, unleashing inflation.

President Joe Biden announced Tuesday that the United States would release 50 million barrels of oil from the Strategic Petroleum Reserve to help cool prices, in coordination with China, India, South Korea, Japan and Britain.

Consumer spending is picking up after slowing sharply in the third quarter due to the upsurge in infections caused by the Delta variant and widespread product shortages.

Fears that shelves are empty and having to pay even more for scarce items has encouraged Americans to start their Christmas shopping early.

Retailers expect Christmas sales to be the best in years, but some economists are warning of the risks. Coronavirus infections are on the rise again, which could lead some consumers to cut spending on travel and entertainment, including dining out.

Price pressures heated up in October.

The Personal Consumption Expenditure (PCE) price index, which excludes volatile components of food and energy, rose 0.4% after gaining 0.2% in September.

In the 12 months to October, the so-called basic PCE price index accelerated by 4.1%, after a year-on-year increase of 3.7% in September.

The basic PCE price index is the Federal Reserve’s preferred measure of inflation for its 2% flexible target.

(Report by Lucia Mutikani; Edited in Spanish by Javier López de Lérida)

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