WASHINGTON: Americans remained wary consumers in October as spending rose at the slowest pace this year for the second straight month, Commerce Department data showed Wednesday.
Consumer spending, which accounts for about 70 percent of US economic activity, increased 0.1 percent in October, the same gain as in September. The last time spending was so weak was in January, when it fell 0.4 percent amid severe winter weather that pummeled the economy.
But Americans had more money in their pockets last month. Personal income grew 0.4 percent in October, in line with the overall trend of 2015. They tucked it away, pushing the personal saving rate -- savings as a percentage of disposable personal income -- to 5.6 percent from 5.3 percent in September.
"Consumers have been more reluctant than previously reported to spend the windfall that they earned during the early period of falling gasoline prices," said Bernard Yaros of Moody's Analytics.
"The personal saving rate will not dip below 5.0 percent as long as consumers are still keen on stashing away their prior windfalls to guard against potential negative events to their wealth."
Ian Shepherdson of Pantheon Macroeconomics said that consumer spending in October had been held back by a sharp drop in utilities spending due to relatively warm weather, leaving them better-placed for spending in the year-end holiday season when retailers make the lion's share of their annual profits.
"People don't spend the windfall from lower heating bills and falling gas prices immediately, so the combination of these factors and the rebound in incomes... drove the saving rate up to a three-year high of 5.6 percent," Shepherdson said.
"This will prove temporary, and we expect a sharp fall in the saving rate to contribute to strong consumption over the holidays."
Inflation remained tame in October, well below the Federal Reserve's 2.0 percent target for price stability.
The personal consumption expenditures price index, the Fed's preferred inflation measure, edged up 0.1 percent in October after falling 0.1 percent in September.
Core PCE prices, which strip out food and energy, increased less than 0.1 percent after rising 0.2 percent the prior month.
Compared with a year ago, PCE prices increased 0.2 percent and core PCE prices rose 1.3 percent, the same gain seen every month this year.
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