Consumers had more income in October and instead of putting it in the bank, they went shopping, according to a new government report.
Personal income grew 0.5% in October compared with the month before, as wage increases more than made up for declines in unemployment benefits from the government following the expiration of pandemic-era relief programs, the Bureau of Economic Analysis said Wednesday in its monthly report on income and spending. People were inclined to spend the extra pocket money, as inflation-adjusted spending accelerated for a third month, rising 0.7%. They also saved less of their disposable income—7.3%, compared with 8.2% in September—staying within pre-pandemic norms and a far cry from April 2020, when the saving rate hit 33.8%.
All that extra money didn’t go as far as it might have, though. The report also showed core inflation (not including food and energy) rising to 4.1% from a year ago, compared with 3.7% in September, hitting its highest level since 1991. That was in line with what forecasters at Moody’s Analytics had expected, possibly signaling that elevated inflation isn’t going away anytime soon.
“Inflation is no doubt a headwind, but in October at least, it was not enough to stop consumers from spending,” economists at Wells Fargo Securities said in a commentary.
The bureau’s consumption and expenditure report is the latest of several reports showing that when it comes to shopping, consumers are shrugging off rising prices and continuing to buy. But even if inflation isn’t stopping people from spending, it is bumming them out, according to the University of Michigan’s widely watched poll measuring consumer sentiment. In final figures for November released Wednesday, the consumer sentiment index—a measure of how people feel about the economy and their own finances—fell compared with October, although the decline turned out to be a little less severe than preliminary data released in the middle of the month had indicated.
“The decline was due to a combination of rapidly escalating inflation combined with the absence of federal policies that would effectively redress the inflationary damage to household budgets,” said Richard Curtin, chief economist at the University of Michigan Surveys of Consumers, in a commentary.
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