Consumer prices rose 5% year-on-year in the United States, a 31-year record.
The Commerce Department figure, a key indicator used by the Federal Reserve, also reported that consumer spending, which accounts for 70% of economic activity, rebounded in October at the same rate of 1.3%, twice that in September.
Consumer prices rose 5% compared to the same period last year, the most significant increase in 12 months since 1990, the Commerce Department reported Wednesday.
According to the PCE index, month-to-month inflation was 0.6% between September and October. In addition, household income and expenses increased much more than expected about September, 0.5% and 1.3%, respectively.
Two weeks ago, the Bureau of Labor Statistics had reported 6.2% year-on-year inflation, which was also a record since 1990.
Rising prices this year contributed to the 1.6% rise in spending in November. However, adjusted for inflation, spending rose a solid 0.7% following a 0.3% inflation-adjusted rise in September.
At the same time, US consumer spending rebounded in October, with a substantial rise of 1.3%, as did inflation, which has risen in the past year at the fastest pace in more than three decades. Last month’s jump in this indicator was double the 0.6% increase in September, the Commerce Department added.
Consumer spending, which accounts for 70% of economic activity, is being watched closely by economists, who believe that strength in this area will lift the overall economy in the last three months of this year. Personal income, which provides the fuel for future spending increases, rose 0.5% in October, after falling 1% in September, reflecting a decline in public aid.
Although COVID-19 cases have started to rise again in many parts of the country in recent weeks, economists do not believe that the latest increase is enough to stop consumer spending.
Consumers directed their spending to both goods and services. For example, much of the $ 123.8 billion increase in spending on goods went to motor vehicles and parts. In comparison, according to the government, international travel was one component of the $ 90.5 billion increase in spending on services, which was felt in all sectors.
According to the data, Americans saw their income rise on the back of rising wages and asset gains, also indicating that the rise was dampened by lower government benefit payments, likely due to the expiration of benefits—pandemic relief programs.
In turn, the number of Americans filing new jobless claims fell last week to a low since 1969, according to the Labor Department.
GDP slows down
The US economy slowed to a modest 2.1% annual rate in the third quarter, slightly better than initially reported. But economists expect a solid rebound in the October-December quarter, as long as rising inflation and the recent spike in COVID-19 cases don’t derail economic activity.
The increase in Gross Domestic Product – the economy’s total output of goods and services – was above an initial estimate of 2% for the third quarter. Still, the revision remains well below the solid gains of 6.3% in the first quarter of this year and 6.7% in the second.
The weak performance of the US economy in the summer had reflected a sharp slowdown in consumer spending, as an increase in COVID-19 cases from the delta variant caused people to become more cautious when buying and hindered them. In addition, supply chains made items such as new cars challenging to come by and contributed to rising inflation to levels not seen in three decades.