Consumer Spending Slows Down as Americans' Savings Dry Up

Growth in consumer spending fell to the lowest point since March as Americans’ savings fall from the all-time highs seen during the COVID-19 pandemic, according to the Bureau of Economic Analysis (BEA).

Consumer spending, measured by the personal consumption expenditure (PCE), increased by $41.2 billion in the month of October, an increase of 0.2%, less than the 0.7% increase that was seen in September as Americans cut back, accordingto the BEA. The cooling in spending follows a huge decline in the amount of savings Americans collectively hold, falling from over $1 trillion in May to $768.6 billion in October, far from the all-time high of almost $6 trillion in April 2020, according to the Federal Reserve Bank of St. Louis.

The PCE gain marks the smallest increase month-to-month since March, when consumer spending declined 0.08%, according to the Federal Reserve Bank of St. Louis.

The PCE price index, the Federal Reserve’s preferred measure of inflation, increased 3.0% for October year-over-year, down from 3.4% in September and far from the Fed’s 2% inflation target, according to the BEA. The increase year-over-year was led by price gains in services, up 4.4% for the month, compared to just 0.2% for goods.

PCE increased $53.1 billion in spending for services, while goods spending fell $11.9 billion, according to the BEA. The biggest contributor to the increase in services was in healthcare, followed by housing and utilities and international travel.

Capital by Jorge Salvador is licensed under Unsplash

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