A gauge of US consumer spending rose more than expected in October as households bought a range of goods, suggesting upside momentum in the economy early in the fourth quarter.
While demand is picking up, inflation remains muted. Other data yesterday showed an unexpected fall in consumer prices last month, which should give the Federal Reserve room to maintain its current pace of bond purchases for a while.
Retail sales excluding automobiles, gasoline and building materials increased 0.5 per cent last month after advancing 0.3 per cent in September, the Commerce Department said.
Economists polled by Reuters had expected so-called core sales, which correspond most closely with the consumer spending component of gross domestic product, to rise 0.3 per cent.
The better-than-expected increase in core retail sales suggested consumer spending would likely accelerate from a two-year low touched in the third quarter and probably limit downside risks to economic growth during the fourth quarter.
“Overall this suggests the consumers are supporting the current recovery,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.
Still, that is not enough to generate some inflation in the economy. In a separate report, the Labor Department said its Consumer Price Index slipped 0.1 per cent last month as gasoline prices fell sharply, after rising 0.2 per cent in September.
In the 12 months through October, the CPI rose 1.0 per cent, the smallest gain since October 2009.