Personal spending dropped in line with expectations as personal income rose much higher than anticipated in October, according to a report released by the U.S. Department of Commerce on Wednesday morning. The report also showed core inflation remain flat over the month.
Total personal spending, which comprises roughly 70% of U.S. gross domestic product, fell a full 1.0% in the month, following a cutback of 0.3% in September. Annually, spending has risen 2.3%.
The personal income category advanced 0.3% in the month, against a consensus expectation of just 0.1%, and following a 0.1% rise in September. Annually, incomes have risen 3.3%.
The Federal Reserve's preferred measure of inflation, the personal consumption expenditures (PCE) core deflator, was essentially flat in the month, falling 0.011% in October, as expected. In the previous month, core PCE advanced by 0.2%.
Annual core PCE remains one-tenth above the Fed's unofficial target level of 2.0%, but going forward, most economists say that inflation is off the radar.
Compensation rose 0.1% in October after a flat reading in September and a 0.3% gain in August, while wages and salaries increased 0.1%, erasing the 0.1% decline in September.
By Patrick McGee and edited by Stephen Huebl
©CEP News Ltd. 2008