Consumer purchases climbed in September by the most in three months as incomes grew, signaling momentum in the biggest part of the U.S. economy.
The 0.5 percent advance in spending followed a 0.1 percent decline the previous month, a Commerce Department report showed Monday. The median forecast in a Bloomberg survey called for a 0.4 percent gain.
While the results indicate a solid end for the third quarter, disposable income, or the inflation-adjusted money left over after taxes, was little changed for a second month. Incomes increased 0.3 percent in September, slightly faster than the 0.2 percent gain in August.
Jennifer Lee, senior economist at BMO Capital Markets, said the report depicted a "good handoff" from the third quarter going into the fourth quarter.
"More money coming in helped support stronger spending," Lee said, noting that the rise in incomes marked the seventh consecutive increase. Such support is needed to drive faster economic growth, which picked up last quarter despite weakness in household purchases.
"We entered the holiday quarter with good support from the consumer," said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. "As long as we continue to see employment growth and wage growth, that'll put more money in people's pockets and give them the ability to spend at a faster pace."
Inflation-adjusted spending rose 0.3 percent in September after a 0.2 percent decline. The advance in purchases included a 1.8 percent jump in durable goods.
The September figures provide more perspective on how consumer spending was doing toward the end of the quarter. Gross domestic product climbed at a 2.9 percent annualized rate in the third quarter after a sluggish first half, data showed Friday. Household purchases grew 2.1 percent, or about half the pace as in the previous three-month period.
For September, forecasts for consumer spending ranged from no change to an increase of 0.6 percent, according to the Bloomberg survey.
The saving rate decreased to 5.7 percent from 5.8 percent. Wages and salaries rose 0.3 percent.
The report's price gauge based on the personal consumption expenditures index, the Federal Reserve's preferred measure of inflation, rose 1.2 percent from a year earlier, the most since November 2014.
The core price measure, which excludes food and fuel, increased 1.7 percent from September 2015. Inflation hasn't reached the Fed's 2 percent goal since 2012.
The Fed's rate-setting committee meets today and tomorrow, and investors see a slim chance for a rate move this week, with a higher probability for December.
Information for this article was contributed by Shobhana Chandra of Bloomberg News and Martin Crutsinger of The Associated Press.
Business on 11/01/2016