Household spending rose less than forecast in October, showing the biggest part of the U.S. economy was off to a slow start heading into the holiday-shopping season.
Purchases increased 0.1% for a second month, Commerce Department figures showed Nov. 25 in Washington. The median forecast of 74 economists in a Bloomberg News survey called for a 0.3% advance. Income gains accelerated and the saving rate jumped to the highest level in almost three years.
Consumers last month pocketed most of the savings from the plunge in gasoline prices, pickup in wages and lower heating bills caused by milder-than-usual temperatures, signaling households will remain frugal heading into 2016. Low inflation and gains in employment indicate Americans have the wherewithal to boost spending should confidence hold firm.
“People are still a little bit worried that the economy is not back up to full health,” Russell Price, senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “Job growth improved clearly in the month of October, and we’re seeing better wages and salaries. That should fall to the bottom line and certainly will be positive for consumers’ spending ability. They of course have to have the confidence to be able to spend, and that still remains kind of shaky.”
Other reports Nov. 25 showed demand for capital equipment climbed in October by the most in three months and fewer Americans filed for unemployment benefits last week.
Wages rose 0.6% in October, the biggest gain in five months, after being little changed in September, the Commerce Department’s report showed. The gain in pay contributed to a 0.4% increase in incomes that was twice as large as the prior month’s advance. The reading matched the median forecast in a Bloomberg survey.
Projections for consumer spending in the Bloomberg survey ranged from gains of 0.1% to 0.4%.
The Nov. 25 data also showed that after adjusting for inflation, in order to generate the figures used to calculate GDP, purchases increased 0.1% in October for a second month.
Household outlays on services were little changed in October after adjusting for inflation, probably reflecting a drop in utility use. Last month marked the fourth-warmest October for the contiguous U.S. in National Oceanic and Atmospheric Administration data that start in 1895. The milder temperatures brought the year-to-date average to its warmest since 2012, according to the agency figures.
Worker pay increased 2.5% over the 12 months ended in October, the most in more than six years, following a 2.3% gain the prior month. They had been stuck around near 2% on average since the current expansion began in mid-2009.
Gasoline costs have been receding for most of the past five months. The average price of a gallon of regular gasoline fell to $2.06 on Nov. 23, the lowest since February, according to auto group AAA. That compares with a daily average of $3.34 per gallon in 2014.
