U.S. consumer spending surged in September, but was helped in part by higher prices as inflation remained hot amid shortages of motor vehicles and other goods amid economic constraints. global supply.
The Commerce Department said on Friday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.6 percent last month. Data for August has been revised higher to show spending rebounding to 1.0% instead of 0.8% as previously reported.
COVID-19 flared up again over the summer causing worsening worker shortages at factories, mines and ports, further straining supply chains.
Aside from the spring 2020 shutdown, which caused a massive drop in output, the third quarter was the worst for motor vehicle production since early 2009 because of a global shortage of semiconductors.
Price pressures remained strong in September, reducing consumer purchasing power.
The personal consumption expenditures (PCE) price index, which excludes volatile food and energy components, rose 0.2 percent after rising 0.3 percent in August. In the 12 months through September, the underlying PCE price index rose 3.6% following a similar gain in August.
The underlying PCE price index is the Federal Reserve's preferred inflation gauge for its flexible 2% inflation target. The Fed is expected to announce at its policy meeting next week that it will begin reducing the amount of money it is pumping into the economy through monthly bond purchases.
Consumer spending and inflation data were included in the gross domestic product report for the third quarter released on Thursday. Consumer spending growth slowed to 1.6% year-on-year after posting double-digit gains in the previous two quarters, with spending on goods like motor vehicles falling at a 26.2 percent pace. .
That has limited economic growth to 2.0%, the slowest rate since the second quarter of 2020, when the economy faltered due to strict distancing measures to stem a wave of COVID-19 infections- 19 first.
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