Consumer Spending Rises While Inflation Stays High, Risking More Rate Hikes

Consumer spending increased 0.7% in September, accelerating from a 0.4% gain in August. Personal income rose 0.3%.

Inflation remained elevated. The PCE price index rose 0.4% month-over-month; up 3.4% year-over-year. Core PCE rose 0.3% monthly; up 3.7% annually.

Saving rate fell to 3.4% from 4.0% as consumers tapped excess savings and put away less money.

Spending strength suggests economic growth remained solid in Q4, though risks of slower spending in 2023 as excess savings dwindle.

Hotter inflation readings mean risks of more Fed rate hikes persist, though a pause is still expected at the Nov 2 meeting after recent tightening in financial conditions.