WASHINGTON – U.S. consumers increased their spending in October even though their wages and salaries barely increased, raising questions about how strong the economy will grow at the end of the year.
Consumer spending increased 0.3 percent in October compared with September when spending rose 0.2 percent, the Commerce Department reported Friday. Wages and salaries rose a slight 0.1 percent after a much stronger 1 percent rise in September.
Overall income actually fell 0.1 percent following a 0.5 percent rise in September. But September’s gain was inflated by a legal settlement that boosted farm income that month, leading to a big decline in farm income in October.
The personal saving rate dipped to 4.8 percent of after-tax income in October, down from 5.2 percent in September, reflecting the difference between spending and income.
The rise in spending reflected gains in purchases of long-lasting manufactured goods such as autos and gains in spending on nondurable goods such as clothing and services such as rent and utilities. It meant a solid increase for the first month of the current quarter.
Consumer spending is closely watched because it accounts for 70 percent of economic activity.