US consumer spending up a modest 0.6% with inflation high

WASHINGTON (AP) — American consumers slowed their spending to a gain of just 0.6% in September, a cautionary sign for an economy that remains in the grip of a pandemic and a prolonged bout of high inflation.

At the same time, a key inflation barometer that is closely followed by the Federal Reserve surged 4.4% last month from a year earlier. Sharply rising prices, in part a result of supply shortages, have imposed a growing burden on American households. For months, annual inflation has remained far above the modest annual rates of 2% or less that prevailed before the pandemic recession.

Friday’s report from the Commerce Department also showed that personal incomes, which provide the fuel for spending fell 1% in September the biggest decline in four months. Wages have been rising in many sectors of the job market as employers struggle to find enough workers to fill jobs. But the expiration of emergency federal programs has subtracted from the nation's overall income.

The economy, while growing, is still being hampered by COVID-19 cases and persistent supply shortages. On Thursday, the government estimated that economy slowed sharply to a 2% annual growth rate in the July-September period, the weakest quarterly expansion since the recovery from the pandemic recession began last year.

For the July-September quarter as a whole, consumer spending, which fuels about 70% of overall economic activity, weakened to an annual growth rate of just 1.6%. That was down significantly from a 12% surge in consumer spending in the previous quarter.

Economists remain hopeful for a bounce-back in the current quarter, with confirmed COVID cases declining, vaccination rates rising, businesses investing and more Americans venturing out to spend money. Many analysts think GDP will rebound at a solid annual growth rate of at least 4% this...