US consumer spending rose 0.3% in September, indicating weaker economic momentum amid a sluggish labor market and rising living costs.
US consumer spending rose only slightly in September, indicating weaker momentum at the end of the third quarter as a sluggish labor market and higher living costs curtailed demand, according to Reuters.
The Commerce Department's Bureau of Economic Analysis reported that spending, which accounts for more than two-thirds of economic activity, increased by 0.3% after a downwardly revised 0.5% gain in August. Economists had forecast a 0.3% rise. The report's release was delayed by a record 43-day government shutdown.
This slowdown followed three months of solid gains, primarily driven by high-income households benefiting from a stock market rally. Economists noted that middle- and lower-income households were squeezed by labor market stagnation and US tariffs, leading to what they describe as a K-shaped economy.
Goldman Sachs analysts cautioned that weak income growth and cuts to government assistance programs, such as Medicaid and food stamps, could negatively impact low-income spending in 2026.
Despite the moderation in September, consumer spending likely grew robustly in the third quarter. The Atlanta Federal Reserve estimated that GDP expanded at a 3.8% annualized rate from July to September, matching the growth rate of the second quarter. The Bureau of Economic Analysis is set to release its delayed GDP estimate on December 23.
The Personal Consumption Expenditures Price Index rose by 0.3% in September, bringing annual inflation to 2.8%. Core inflation also stood at 2.8%. Markets have already priced in a 25-basis-point rate cut by the Federal Reserve next week.
