U.S. consumer spending rose more than expected in September as households boosted purchases of motor vehicles and inflation increased steadily, which could bolster expectations of an interest rate hike from the Federal Reserve in December.
The Commerce Department said on Monday that consumer spending, which accounts for about 70 percent of U.S. economic activity, increased 0.5 percent after a downwardly revised 0.1 percent drop in August.
Last month's increase in consumer spending offered a fairly strong handoff from the July-September period to the current quarter.
The report was published ahead of the beginning of the Fed's two-day policy meeting on Tuesday. The U.S. central bank is not expected to raise rates at that meeting but is expected to increase borrowing costs in December.
Economists polled by Reuters had forecast consumer spending rising 0.4 percent last month. Spending in August was previously reported to have been unchanged.
When adjusted for inflation, consumer spending rose 0.3 percent after falling 0.2 percent in August.
The spending figures were incorporated into last Friday's report on third-quarter gross domestic product. Consumer spending increased at a 2.1 percent annual pace after advancing at a robust 4.3 percent rate in the prior period.
Despite cooling off, consumer spending combined with a spurt in soybean exports and a turnaround in inventory investment to boost economic growth to a 2.9 percent pace in the third quarter. The economy grew at a 1.4 percent rate in the April-June quarter.