U.S. consumer spending recorded its biggest increase in more than eight years in September, likely as households in Texas and Florida replaced flood-damaged motor vehicles, but underlying inflation remained muted.
The Commerce Department said on Monday consumer spending, which accounts for more than two-thirds of U.S. economic activity, jumped 1.0 percent last month. The increase, which also included a boost from higher household spending on utilities, was the largest since August 2009.
Consumer spending increased by an unrevised 0.1 percent in August. Economists polled by Reuters had forecast consumer spending increasing 0.8 percent in September.
The data was included in last Friday's third-quarter gross domestic product report, which showed that growth in consumer spending growth slowed to a 2.4 percent annualized rate after a robust 3.3 percent growth pace in the second quarter.
The moderation in consumption was offset by a rise in inventory investment, business spending on equipment and a drop in imports, which left the economy growing at a 3.0 percent rate in the third quarter after the April-June period's brisk 3.1 percent pace.
The Commerce Department said September data reflected the effects of Hurricanes Harvey and Irma, but said it could not quantify the total impact of the storms on consumer spending and personal income.
Consumer spending in September was buoyed by purchases of motor vehicles, probably as drivers in Texas and Florida replaced automobiles that were destroyed when Harvey and Irma slammed the states in late August and early September. Spending on long-lasting goods like autos surged 3.2 percent last month. Outlays on services rose 0.5 percent.
Though disruptions to the supply chain as a result of the hurricanes also likely contributed to an uptick in inflation last month, underlying price pressures remained benign.
The Federal Reserve's preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, edged up 0.1 percent in September. The so-called core PCE has now increased by 0.1 percent for five straight months.
The core PCE increased 1.3 percent in the 12 months through September after a similar gain in August. The core PCE has undershot the Fed's 2 percent target for nearly 5-1/2 years.
When adjusted for inflation, consumer spending increased 0.6 percent in September after slipping 0.1 percent in August. While that put consumer spending on a higher growth trajectory heading into the fourth quarter, the pace of increase is unlikely to be sustained amid moderate wage gains.
Personal income rose 0.4 percent last month after increasing 0.2 percent in August. Wages advanced 0.4 percent. Savings fell to $441.9 billion in September from $521.4 billion in the prior month.