US personal spending rises less than expected, Commerce Department reveals

US consumer spending rose less than expected in October even as personal incomes edged higher than anticipated, the Commerce Department revealed on Wednesday.

Personal spending climbed 0.3% in October following an upwardly revised 0.7% increase a month earlier, missing forecasts for a 0.5% gain. Consumer spending accounts for 70% of US economic activity.

Incomes expanded 0.6% last month after an upwardly revised 0.4% rise in September, beating estimates for unchanged growth.

“October’s personal income and spending figures were disappointing and add to our fears that fourth-quarter GDP growth will be a more modest 2.0% to 2.5% annualised,” said Paul Ashworth, chief US economist at Capital Economics.

“Nevertheless, at this stage, that won’t stop the Federal Reserve from hiking interest rates later this month.”

The data comes a day after the government revealed that gross domestic product grew an annualised 3.2% in the third quarter, boosted by consumer spending.

The personal consumption expenditures (PCE) price index rose an unchanged 0.2% month-on-month in October. Economists had predicted a 0.3% increase.

On a year-on-year comparison the PCE jumped 1.4% in October, the biggest gain since October 2014, following a 1.2% rise in September.

The core PCE, which excludes food and energy prices and is the Federal Reserve’s preferred measure of inflation, gained 0.1% month-on-month after rising by the same margin in September. The year-on-year increase in the core PCE was 1.7% in October, unchanged from the prior month. Both core readings were in line with expectations.