US consumer spending picks up, inflation up 3.6% year-on-year

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US consumer spending picks up, inflation up 3.6% year-on-year

On Friday, US Commerce Department data had unmasked that US consumer spending gained further ground in September despite a staggering upsurge in inflation indicators, largely riding on the back of higher goods’ prices as a lingering shortage in motor vehicles alongside other household items continued to weigh on producers’ price index amid a global-scale supply constraint.

Adding further impetus to a sky-scrapping US inflation, other economic data released earlier in the day had unveiled that the US employers had fleshed up wages to a record peak in Q3, 2021, amid a sheer scarcity of available workers ahead of a holiday season what analysts claimed could generate as many as $851.2 billion in sales on an average, up about 18.7 per cent compared to 2020.

More importantly, the US Fed’s key inflation indicator, core PCE (Personal Consumption Expenditure) price index, rose by 0.2 per cent in September, remarking a 3.6 per cent increase on an annualized basis while challenging Fed Chair Powell’s long-held outlook that the latest leg of blistering inflation-surge would be ‘transitory.

US consumer spending rose robustly in September

According to US Commerce Department, US consumer spending grew by 0.6 per cent in September after bouncing back as much as 1.0 per cent in August, beating an analysts’ estimate of 0.5 per cent, however, a 0.2 per cent decline in spending in manufacturing sectors had largely been overshadowed by a 0.7 per cent increase in services spending.

Besides, wages climbed 0.8 per cent in September compared to the same time a year earlier, while personal income dipped 1.0 per cent, suggesting a longer spell of higher inflation, as Americans were reportedly scuffling to grapple with an upswing in household items’ prices.

Meanwhile, as a decline in delta cases alongside a heightening up of consumers’ spending at the end of third quarter with households' wealth hovering at record levels, seemingly had fared well for consumer spending, the lifeblood of US economy accountable for roughly 66.0 per cent of entire economic activity, a chief economist at FWDBONDS in New York, Chris Rupkey said followed by the data, “The economy has a supply problem not a demand problem. The economy has money to burn and that is why inflation will be hard to extinguish”.