U.S. consumer spending sizzles in October – and it’s not just all high inflation

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Number: Rising inflation is causing Americans to pay higher consumer prices, but they are also buying a lot of goods and services to help the US economy improve, a new report showed.

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Consumer spending rose 1.3% last month, government said on Wednesday, Americans spent more on new cars and travel-related services in October.

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Economists polled by the Wall Street Journal had forecast a growth of 1%.

However, higher prices took away almost half of the gains. Consumer spending grew a more modest but still strong 0.7% after factoring in inflation.

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Consumer prices rise again and US inflation hits 31-year high

High inflation is likely to persist at least through the middle of next year. A measure of inflation included in the spending report rose again in October, pushing growth over the previous year to a 31-year high of 5%.

Earnings rose 0.5% last month, but grew more than inflation.

big picture: The US economy suffered a minor setback in late summer from the rapid spread of the coronavirus delta strain. Some stopped going out and cut spending on services such as eating out or traveling.

Families are still spending a lot of money, and a high savings rate suggests they have the ability to spend even more.

However, not all spending is a sign of strong demand. The sharpest rise in inflation in 30 years means Americans are now paying more for products and services than they were a year ago.

The Fed has bet on the future of low inflation. what could be wrong here

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