Last month's rise spending was in line with economists' expectations. Consumer spending has slowed since jumping 0.5% in July. The data was included in the gross domestic product report for the third quarter, which was published on Wednesday. The government reported that growth in consumer spending slowed to a still-healthy 2.9% annualized rate last quarter after surging at a 4.6% pace in the second quarter, the fastest since the fourth quarter of 2017.
That softened some of the blow on the economy from the second straight quarterly contraction in business investment. The economy grew at a 1.9% rate in the third quarter after expanding at a 2.0% pace in the April-June period. Last month's cooling in consumer spending was accompanied by a retreat in inflation. Consumer prices as measured by the personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, were unchanged after gaining 0.1% in August.
That lowered the annual increase in the so-called core PCE price index to 1.7% in September from 1.8% in August. The core PCE index is the Fed's preferred inflation measure. It has undershot the US central bank's 2% target this year. The tame inflation environment was also underscored by a separate report from the Labor Department showing labor costs increased 0.7% in the third quarter after rising 0.6% in the second quarter. That raised the year-on-year rate of gain in the labor costs to 2.8% from 2.7% in the second quarter. Economists estimated the work stoppage cut between 75,000 and 80,000 jobs from October payrolls. As a result, the employment report on Friday will likely show only 89,000 jobs were added in October, down from 136,000 in September, according to a Reuters survey of economists.
Wages were unchanged after surging 0.6% in August. The government said it had adjusted wages and salaries down at an annualized rate of $1.9 billion in September to account for the GM strike. Economists said even without the strike, wage gains would still have been soft.