US personal spending snaps back, 'core' PCE prices dip more than expected
Consumer spend in the US snapped back last month, mirroring the improvement seen in personal incomes and helped by a dip in prices.
According to the Department of Commerce, in October and in nominal terms personal incomes and spending increased at a month-on-month clip of 0.5% and 0.6%, respectively.
Economists had anticipated an increase of 0.4% in both.
Downwards revisions to the August and September readings for personal consumption expenditures meant that the October tally was in fact a tad weaker than anticipated, although PCE outlays did accelerate significantly after a downwardly revised month-on-month increase of 0.2% for September.
The headline PCE price deflator was unchanged at up by 2.0% year-on-year, but at the 'core' level, which is the Federal Reserve's preferred inflation gauge, PCE inflation slipped from 1.9% to 1.8% (consensus: 1.9%).
Furthermore, September's reading on the core rate of PCE inflation was revised lower by a tenth of a percentage point to 1.9%.
When adjusted for inflation, disposable personal incomes, or what Americans have left over to spend once taxes are subtracted, rose at a month-on-month clip of 0.3% in October following 0.1% gain for September.
The personal savings rate dipped by a tenth of a percentage point from September's upwardly revised 6.3% to 6.2% of Americans' disposable income.
Commenting on Thursday's data, Paul Ashworth at Capital Economics said: "With the collapse in gasoline prices likely to provide a sizeable boost to households' purchasing power over the next couple of months, the outlook for consumption remains positive, even with the boost from the earlier tax cuts now fading.
"[...] With unit labour cost growth unusually muted for this stage of the cycle and the stronger dollar putting downward pressure on imported goods prices (even when the impact of the tariffs are factored in), we expect core PCE inflation to remain close to its current level for some time. The slump in gasoline prices will drive headline inflation even lower next year."