Consumer spending saw its biggest monthly increase in eight years in September as residents of hurricane hit Texas and Florida replaced cars and trucks and began to rebuild their wind and flood damages homes.
Personal consumption, which comprises about two-thirds of U.S. GDP, jumped 1.0 percent last month, according to the Commerce Department on Monday. It was the largest gain since August 2009 and slightly ahead of the 0.8 percent median estimate. Spending had risen 0.1 percent in August.
Inflation adjusted consumption increased a more modest 0.6 percent following a 0.1 percent fall in August.
The core personal consumption index (PCE), the Federal Reserve's preferred inflation measure, rose 1.3 percent over the prior 12 months in September the same as in August. This gauge has fallen almost one-third since reaching 1.9 percent in December and January. It has not been at or above the Fed's 2 percent target since April 2012. The central bank has underestimated the inflationary potential of the U.S. economy for more than fiive years.
The surge in consumer spending was boosted by sales of motor vehicles, up 9.9 percent, as purchases of durable goods, items designed to last at least three years, soared 3.5 percent.
Personal income rose 0.4 percent in September following August's 0.2 percent gain. Wages were also up 0.4 percent.
People drew upon their saving to support the September surge in spending. The saving rate dropped to 3.1 percent, the lowest it has been since December 2007.
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