Consumer spending up a weak 0.1 percent in October

Economists polled by MarketWatch had forecast a 0.3% increase in spending. That suggests consumer spending, which accounts for more than two-thirds of U.S. economic activity, has slowed from the third quarter’s brisk 3% annual pace.

A separate report, also from the Commerce Department, had orders for long-lasting manufactured goods posting a solid gain in October after two months of weakness, while a key category that tracks business investment plans advanced by the largest amount in three months.

According to figures released by the Commerce Department, spending rose 0.1% month-on-month in October compared with a 0.1% increase in September and with analysts’ expectations for a 0.3% gain. That’s well below the Federal Reserve’s 2% target, though the central bank appears on track to raise interest rates in December despite a low level of inflation.

Consumer spending posted a modest increase for a second straight month in October, while personal income rebounded after a sluggish September.

Personal income increased 0.4 percent last month, accelerating after a 0.2 percent gain in September.

But the economy, which expanded at a 2.1 percent rate in the third quarter, could get support from business spending.

The tepid rise in spending could combine with an anticipated drag from an ongoing inventory reduction to hold the economy to around a 2 per cent growth rate in the fourth quarter. Consumption had climbed 0.1% in…

If you read all the reports about weak retail spending, you might wonder how all those dollars saved on gasoline are ending up in the economy.

As a reminder, the Fed wants inflation up in the 2.0% to 2.5% range. That can not last forever, but we just have yet to see how that is translating into significantly higher dollars being spent on consumer goods.