U.S. consumer spending grew at the fastest rate in four months in November, setting the stage for a strong Christmas season amid a rise in income and optimism over the economy.
The Commerce Department reported Friday that personal-consumption expenditures, or household spending, increased 0.4% last month from October — the biggest gain since July.
The cost of goods and services also increased slightly in November but inflation more broadly was still quite low, with the so-called PCE price index rising 0.2% last month to push the yearly rate of inflation up a tick to 1.5% — well below the Federal Reserve’s 2% inflation target.
“The consumer sector appears to be in pretty good shape at this point. We should see that continue into 2020,” Scott Brown, chief economist at Raymond James, told The Wall Street Journal.
As MarketWatch reports, “Steadily rising incomes — a byproduct of the strongest labor market in decades — have made it easier for households to spend.” According to the Commerce Department, incomes climbed a solid 0.5% last month, rebounding from a flat reading in October that economists viewed as an anomaly.
November retail sales data released last week had indicated the crucial holiday shopping season may have gotten off to a soft start but that may have resulted from a late Thanksgiving holiday pushing Black Monday into December.
Americans still spent 16% more on shopping from Thanksgiving through Cyber Monday this year compared to 2018, according to the National Retail Federation, and several large retailers reported strong demand into the holiday season.
“Despite the late start to the holiday season, U.S. consumers were in a festive mood, suggesting the backbone of the economy remains rock solid,” said Sal Guatieri, senior economist at BMO Capital Markets.
In November, households spent 0.5% more on goods, helping drive the overall rise in spending. Spending on vehicles contributed strongly to the 1% increase in spending on long-lasting goods.
Consumers were also able to save more last month as the savings rate climbed to 7.9% from 7.8%.