Sunday, November 28, 2021
Nov. 28, 2021

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U.S. personal spending exceeds forecast in August

Measure of inflation also higher than experts’ estimates


U.S. personal spending growth accelerated by more than forecast in August, driven by goods purchases, while a closely watched measure of inflation exceeded estimates.

Purchases of goods and services increased 0.8 percent from a month earlier, following a downwardly revised 0.1 percent decline in July, Commerce Department figures showed Friday. Spending in July was previously reported as a 0.3 percent gain.

The personal consumption expenditures price gauge, which the Federal Reserve uses for its inflation target, rose 0.4 percent from a month earlier and 4.3 percent from a year earlier. The annual increase was the largest since 1991.

The figures suggest that consumer demand remained robust in August, despite a rise in COVID-19 infections. The spending increase was driven by a jump in goods outlays — specifically food and household supplies — likely reflecting a shift away from activities like dining out and travel due to heightened health concerns.

The median estimate in a Bloomberg survey of economists called for a 0.7 percent month-over-month increase in total spending and a 0.3 percent rise in the price index.

Stock futures pared gains, the dollar fell and Treasuries were little changed after the report.

Adjusted for inflation, spending in August also picked up after falling the previous month. Real personal outlays rose 0.4 percent in August after a revised decline of 0.5 percent in the prior month.

Inflation-adjusted spending on services rose 0.3 percent from a month earlier, marking a deceleration from the 0.7 percent gain in July. Merchandise outlays climbed 0.6 percent after a 2.6 percent drop, the report showed.

Supply has struggled to keep up with rapidly recovering demand since the start of this year, with companies looking to fill a record number of open positions and acquire the materials needed for production. Those constraints have pushed prices higher and corroded Americans’ buying power.

The core PCE, which excludes food and energy, rose 0.3 percent for a second month. The measure was up 3.6 percent from a year earlier, matching the highest since 1991.

Federal Reserve Chair Jerome Powell said last week that the supply-chain disruptions which have been lifting inflation rates around the world will ultimately prove temporary.

Personal incomes, meanwhile, rose 0.2 percent after rising 1.1 percent in the prior month due to a boost from an advance disbursement of the child tax credit. Wages and salaries climbed 0.5 percent.

Disposable personal income, or after-tax income adjusted for inflation, decreased 0.3 percent in August.

The saving rate — which has been had been elevated for months as a result of stimulus checks and enhanced unemployment benefits — dropped to 9.4 percent in August from 10.1 percent.