U.S. personal spending growth accelerated by more than forecast in August, reflecting an increase in outlays for nondurable goods, while a closely watched measure of inflation exceeded estimates.
Purchases of goods and services increased 0.8 percent from a month earlier, following a downwardly revised 0.1 percent decline in July, Commerce Department figures showed Friday.
The personal consumption expenditures price gauge, which the Federal Reserve uses for its inflation target, rose 0.4 percent from a month earlier and 4.3 percent from a year earlier. The annual increase was the largest since 1991.
The figures suggest that consumer demand remained robust in August, despite a rise in COVID-19 infections. The spending increase was driven by a jump in goods outlays — specifically food and household supplies — likely reflecting a shift away from activities like dining out and travel due to heightened health concerns.
The median estimate in a Bloomberg survey of economists called for a 0.7 percent month-over-month increase in total spending and a 0.3 percent rise in the price index.
Adjusted for inflation, spending in August also picked up after falling the previous month. Real personal outlays rose 0.4 percent in August after a revised decline of 0.5 percent in the prior month.
Inflation-adjusted spending on services rose 0.3 percent from a month earlier, marking a deceleration from the 0.7 percent gain in July. Merchandise outlays climbed 0.6 percent after a 2.6 percent drop, the report showed.
Supply has struggled to keep up with rapidly recovering demand since the start of this year, with companies looking to fill a record number of open positions and acquire the materials needed for production. Those constraints have pushed prices higher and eroded Americans’ buying power.
The core PCE, which excludes food and energy, rose 0.3 percent for a second month. The measure was up 3.6 percent from a year earlier, matching the highest since 1991.
Federal Reserve Chair Jerome Powell said this week that the supply-chain disruptions which have been lifting inflation rates around the world will ultimately prove temporary.
“It’s very difficult to say how big the effects will be in the meantime, or how long they will last, but we do expect that we’ll get back, we’ll get through that,” Powell said Wednesday while participating in a virtual panel event.
— Bloomberg News