Strong Consumer Spending and GDP Surge Defy Recession Forecasts

Consumer spending in the U.S. rose sharply by 0.7% in September, exceeding expectations and indicating the strength of the economy. Outlays grew by 4% in the third quarter, the largest increase since 2019 excluding pandemic years. However, after adjusting for inflation, incomes fell for the third consecutive month. Americans spent more on services, including travel and healthcare, but rising costs of necessities played a role. Consumer spending adjusted for inflation increased by a more modest 0.4%. The savings rate declined to 3.4% from 4%, leaving households with less financial cushion. The PCE price index, a key inflation measure, rose higher than expected by 0.4% in September. Despite expectations of a slowdown in spending, a strong jobs market is likely to support continued economic expansion.