U.S. consumer spending, inflation rise moderately amid rate hikes

Nigeria inflation climbs to 26.72%

U.S. consumer spending barely rose in November, while annual inflation increased at its slowest pace in 13 months, but demand is probably not cooling fast enough to discourage the Federal Reserve from driving interest rates to higher levels next year.

Slowing economic activity heading into 2023 amid rising borrowing costs was also flagged by other data from the Commerce Department on Friday showing a modest gain in orders for locally manufactured capital goods last month. The U.S. central bank is trying to slow demand for everything from housing to labor as it fights to bring inflation back to its 2% target.

“The economy is moving in the right direction from the Fed’s perspective, but not quickly enough,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, edged up 0.1% after surging 0.9% in October. Economists polled by Reuters had forecast consumer spending rising 0.2%.

Some of the moderation in spending reflected a shift in demand from goods to services. Slowing price increases for some goods also lowered the dollar amount of consumer spending.

Spending on long-lasting manufactured goods dropped 2.3%, led by decreases in purchases of motor vehicles. There were additional drags to spending from household furnishings and other equipment as well as recreational goods and vehicles.

Outlays on services increased 0.7%, lifted by housing and utilities as well as financial services and insurance. They offset decreases in air transportation services.

The personal consumption expenditures (PCE) price index rose 0.1% last month after climbing 0.4% in October. Food prices increased 0.3%, the smallest gain since December 2021. Prices for energy goods and services dropped 1.5%. Services prices, which can be sticky, rose 0.4%, reflecting housing inflation.

In the 12 months through November, the PCE price index increased 5.5%. That was the smallest annual gain since October 2021 and followed a 6.1% advance in October.

Excluding the volatile food and energy components, the PCE price index gained 0.2% after increasing 0.3% in October. The so-called core PCE price index climbed 4.7% on a year-on-year basis in November, also the smallest rise since October 2021, after increasing 5.0% in October.

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