Consumer spending inches up 0.1%

Incomes jumped 0.4 percent, double the rise in September.

The Department of Commerce has released consumer spending results for October today, wherein it announced a 0.1% increase only.

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

With the growth in incomes and a small rise in spending, the saving rate rose to 5.6 percent of after-tax income in October, up from 5.3 percent in September.

Purchases increased 0.1 percent for a second month, Commerce Department figures showed Wednesday in Washington. However, economists are counting on the strong labor market to bolster the incomes needed to fuel spending in the months ahead.

Fed officials had held off raising rates at their last two meetings as they assessed the degree to which a stronger dollar and a slowing in economies overseas would weigh on the United States. That should fall to the bottom line and certainly will be positive for consumers’ spending ability. Economists also believe that the bulk of spending cuts by oil field firms like Schlumberger (SLB.N) in response to lower crude prices have already been implemented. The median forecast of 74 economists in a Bloomberg survey called for a 0.3 percent advance. Last month marked the fourth-warmest October for the contiguous U.S.in National Oceanic and Atmospheric Administration data that start in 1895. It was the highest monthly savings level in almost three years.

US stock index futures slightly extended gains. But as the labor market continues to tighten, there is optimism that wage growth will pick up and encourage consumers to loosen their purse strings and boost spending. Wages and salaries climbed 0.6%. At $761.9 billion, the level of personal saving was also the highest since the final month of 2012. The data “indicate the indelible impact that the [recession] has had in making consumers more cautious spenders”. It rose 0.2 percent from the same time in 2014.

There was still no sign of inflation, which has persistently run below the Federal Reserve’s 2 percent target. Spending on nondurable goods such as food and clothing edged up 0.1 percent following a big 1.1 percent drop the previous month that in part reflected falling gasoline prices.

Worker pay increased 2.5 percent over the 12 months ended in October, the most in more than six years, following a 2.3 percent gain the prior month.