US consumer spending rises most in a year, core PCE up 0.2%

As per the latest business developments, US consumer spending rose in August at the fastest pace in over a year, helping to power the economy through persistent inflation.

Inflation-adjusted personal spending advanced 0.6% in August from a month earlier, according to Bureau of Economic Analysis data released on Wednesday. That was the biggest monthly jump since March 2025.

The The US central bank’s preferred measure of inflation, the personal consumption expenditures price index, increased 0.3% from a month earlier. Excluding food and energy, the PCE price index rose 0.2%.

Wednesday’s figures are the latest sign the economy is forging ahead despite elevated inflation. With the help of a stable job market and a growing equity market, consumers ramped up their spending for merchandise last month, pushing through high gasoline prices and rising costs across the economy.

Households increased outlays on big-ticket items like motor vehicles and furnishings, as well as discretionary purchases like clothing and food services and accommodations.

Fed officials are eyeing the inflation and spending data closely as they weigh when to mobilize interest rates again, after lifting them this month for the first time in three years.

The September jobs report, due on Friday, along with additional data on inflation and consumers over the upcoming weeks will offer a more complete picture of the economy ahead of the Fed’s Oct. 28 rate decision.

Traders pared bets on an October interest-rate gain after the better-than-anticipated core inflation figures, but they keep see a rate gain before year end. S&P 500 futures rose following the release. Treasury yields declined.

Wednesday’s release included wide-ranging annual updates on gross domestic product, spending and inflation data going back five years, as well as some methodological changes in the way inflation is calculated.

In the second quarter, GDP advanced at a 2.2% seasonally adjusted annual rate, up from a previously noted 1.5%. Consumer spending rose at the fastest pace since the end of 2024. Economic expansion in the first quarter was additionally revised elevated.

While revisions and methodological updates lowered the overall level of inflation in recent months, the trend keeps point to stubborn price pressures. So-called core inflation was up 3% from a year earlier in August, where it’s held for three straight months. The July figure was revised from 3.3% to 3%.

Overall inflation rose 3.4% in August from a year earlier — still well above the Fed’s 2% target and in line with the revised July figure. Inflation has held above the Fed’s goal for more than five years.

From a month earlier, prices for both goods and services increased. That included elevated costs for gasoline, transportation services as well as food services and accommodation. A closely watched measure of services inflation that excludes energy and housing rose 0.4%, the fastest since May.

Inflation keeps erode Americans’ spending power. Inflation-adjusted disposable personal income — money left to spend or save after paying taxes — was flat in August compared to a month earlier, the worst since April.

Consumers do have more of a financial cushion than previously thought, the revisions revealed. Even so, the personal saving rate, or the share of Americans’ disposable income that they save, declined from a month earlier to 4.1% in August. That’s the lowest since 2022.