Americans dig into savings in September to finance splurge on durable goods

Personal consumption in the US shot higher last month, easily outpacing expectations, as Americans dug into their savings to finance a sharp increase in spending on durable goods, especially on vehicles after recent hurricanes.

So-called personal consumption expenditures rose by 1.0% month-on-month in September, according to the Department of Commerce.

That was better than the 0.8% rise economists had penciled in and came alongside upwards revisions to prior months' data.

Incomes on the other hand rose by much less, albeit by a solid 0.4% on the month, as economists correctly anticipated.

The difference between income and spending growth was made up by Americans digging into their savings, which pushed the personal savings rate lower, from 3.6% in September to 3.1% for October.

Inflation also fell short of expectations, with the headline rate for the PCE price deflator accelerating from a 1.4% clip year-on-year to 1.6% (consensus: 1.7%), while at the core level the deflator was steady at 1.3%, as forecast.

Reacting to the data, Ian Sheperdson at Pantheon Macroeconomics said: "The savings rate dropped in October to a new cycle low of just 3.1%, so spending growth will have to be financed mostly by real after-tax incomes, which have risen very slowly in recent months. The relative softness of consumption should be offset by stronger capex and net exports, so for now our working assumption remains that GDP growth will be about 3% for the third straight quarter."