US consumer spending rises solid 0.4 per cent in November

WASHINGTON — Americans lifted their spending 0.4 per cent in November from the previous month, a moderate gain that should sustain steady economic growth.

Personal incomes rose 0.2 per cent, down from 0.5 per cent in the previous month, the Commerce Department said Friday.

Consumer spending jumped by the most in 13 months in October, and November’s solid gain on top of that points to healthy spending in the final three months of the year. Economists closely watch consumer spending because it accounts for about two-thirds of economic activity.

Business spending is showing signs of slowing, leaving more of the burden on consumers to power the economy. A gauge of business investment in large equipment such as machinery and computers fell in November for the third time in four months, according to a separate report Friday.

A measure of inflation tied to consumer purchases slipped, rising 1.8 per cent from a year ago, down from last month’s 2 per cent annual gain.

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That could add to recent pressure on the Federal Reserve to pause its interest rate hikes, since the Fed usually takes such steps to forestall rising inflation. Yet with gas prices falling, inflation is likely to continue to decline in coming months.

Excluding the volatile food and energy categories, inflation rose 1.9 per cent in November from a year earlier. That’s slightly faster than the previous month’s 1.8 per cent but below the Fed’s 2 per cent target.

The Fed raised its benchmark interest rate Wednesday for the fourth time this year but signalled its rate hikes will likely slow soon. Fed policymakers now expect two hikes in 2019, down from a previous estimate of three.

The pickup in spending is eroding Americans’ savings, suggesting that consumers could pull back in the coming months. The savings rate fell to 6 per cent in November, the lowest since March 2013.

The economy expanded at a strong 3.4 per cent annual rate in the July-September quarter, down slightly from a previous estimate, the government said in a separate report Friday. Consumer spending rose at a healthy 3.5 per cent pace in the third quarter.

Christopher Rugaber, The Associated Press