Americans’ incomes increased in September by more than expected, boosted by employment gains and helping to propel consumer spending at the end of the third quarter.
Personal incomes rose 0.9% from the prior month following a 2.5% decline in August, a Commerce Department report showed Friday. That compared with estimates for a 0.4% gain. Household outlays advanced 1.4%, also exceeding forecasts.
The personal saving rate fell for a fifth month but remained elevated at 14.3%. In February, when the unemployment rate was at a 50-year low, the savings rate was 8.3%.
Hundreds of thousands more Americans headed back to work in September as the labor market continued to slowly recover, putting more cash in Americans’ wallets. Though the extended stalemate between lawmakers on additional stimulus relief could restrain growth in incomes, further job gains and a still-elevated savings rate will continue to support consumer spending.
The supplemental jobless payments President Donald Trump authorized in early August also lent an extra boost to incomes, the report showed. “Other” transfer receipts totaled an annualized $963.9 billion during the month, up from about $716 billion.
Gross domestic product rose by a record in the third quarter, and the better-than-expected September spending figures suggest the economy headed into the final three months of the year with solid positive momentum.
The income and spending report showed wages and salaries rose 0.8% in September. Unemployment insurance payments made up 1.8% of annualized income in September, compared to 7% three months earlier.
While the chances of a stimulus package by Election Day on Tuesday have evaporated, House Speaker Nancy Pelosi said Thursday it’s still possible to get a deal on fiscal stimulus with the Trump administration before the start of the new congressional and White House terms in January.
Adjusted for inflation, consumer spending increased 1.2% in September after rising 0.7% in August. Real outlays for durable goods, such as motor vehicles, rose 2.9% in September from a month earlier, while services spending climbed 0.8%.
The broader personal consumption expenditures price gauge, which the Federal Reserve officially targets, rose 0.2% from the prior month and was up 1.4% from a year earlier. The core PCE price index, which excludes food and energy, increased 1.5% in September from a year earlier, less than projected. Policy makers view the core gauge as a better indicator of underlying price trends.
The central bank doesn’t anticipate inflation will pose a threat to the economy any time soon, and policy makers have signaled they plan to hold rates near zero through 2023.
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