American consumer spending slipped in October even as incomes rose and inflation remained quiescent and distant from the Federal Reserve target.
Personal consumption increased 0.3 percent following September's 0.9 percent surge that had been the biggest monthly gain since August 2009, according to Commerce Department records. The boom was partially due to the replacement of vehicles and general rebuilding after the destruction wrought in the late summer by hurricanes on the Gulf Coast and in Florida.
Purchases of goods designed to last three years or more fell 0.1 percent in October after jumping 2.9 percent in September. Spending on non-durable items gained 0.2 percent. Service outlays rose 0.2 percent.
Real personal consumption, which is corrected for price variation, added 0.1 percent following September's strong 0.5 percent increase.
Personal income added 0.4 percent in October, the same as September, the best two months since February and March this year.
The core personal consumption expenditure price index, the Fed's inflation measure of choice, climbed 0.2 percent in October as expected after September's 0.1 percent gain. Annual inflation was 1.4 percent higher as in September.
This inflation gauge has been beneath the central bank's 2 percent target for nearly 5 1/2 years. Outging Fed Chair Janet Yellen said in Congress on Wednesday, as she has many times in the past, that she believed the weak inflation statistics were based on "transitory factors". Though she noted that the inability of the bank to induce inflation 'could reflect something more persistent."
The dollar was largely unchanged after the release of the data at 8:30 am ET, and remained so into the afternoon despite a powerful equity rally that saw the Dow cross 24,000 for the first time in history.
Thursday's economic statistics did little to alter the widespread expectation that the U.S. central bank will raise the Fed Funds rate 25 basis points for the third time this year to 1.5 percent at its December 12-13th meeting.
Chief Market Strategist
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Core PCE Inflation