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Josesv
October 31, 2017, 11:11 PM
U.S. consumer spending recorded its biggest increase in more than eight years in September, likely as households in Texas and Florida replaced flood-damaged motor vehicles, but underlying inflation remained muted.

Households, however, dipped into their savings to fund purchases last month, pushing savings to their lowest level since 2008. Against the backdrop of lackluster wage growth, the drop in savings suggests that September’s robust pace of consumer spending is probably unsustainable.

“Relying on consumer savings to move the economy forward is not going to last for long,” said Chris Rupkey, chief economist at MUFG in New York.

The Commerce Department said on Monday consumer spending, which accounts for more than two-thirds of U.S. economic activity, jumped 1.0 percent last month after an unrevised 0.1 percent gain in August. The increase, which also included a boost from higher household spending on utilities, was the largest since August 2009.

Economists had forecast consumer spending increasing 0.8 percent in September. The data was included in last Friday’s third-quarter gross domestic product report, which showed consumer spending growth slowing to a 2.4 percent annualized rate after a robust 3.3 percent pace in the second quarter.

The moderation in consumption was offset by a rise in inventory investment, business spending on equipment and a drop in imports, which left the economy growing at a 3.0 percent rate in the third quarter after the April-June period’s brisk 3.1 percent pace.


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