US consumer spending rises 0.2% in September

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FILE - In this Oct. 17, 2019, file photo customers look over Harley Davidson motorcycles on display at a dealership in Ashland, Va. On Thursday, Oct. 31, the Commerce Department issues its September report on consumer spending, which accounts for roughly 70 percent of U.S. economic activity. (AP Photo/Steve Helber, File)

WASHINGTON, DC – American consumers modestly stepped up their spending in September, but their incomes grew fast enough to let them save more, too.

The Commerce Department said Thursday that consumer spending rose 0.2% last month, matching August's increase but coming in slightly below economists' expectations. Incomes grew 0.3% lifting the U.S. savings rate to 8.3% in September, highest since March.

A measure of inflation closely watched by the Federal Reserve was flat in September, even excluding volatile food and energy prices. Over the past year, it is up 1.3%, and 1.7% without food and energy.

Consumer spending accounts for about 70% of U.S. economic activity. The government reported Wednesday that consumer spending rose at a solid annual pace of 2.9% from July through September, a bright spot in a quarter when the overall economy grew a mediocre 1.9%.

The rising saving rate is encouraging because it suggests consumers have financial leeway to keep spending and supporting an economic expansion that has already entered a record-breaking 11th year. The savings rate had dropped to 3.2% in 2005 before the Great Recession.

On Wednesday, the Fed, reassured by modest inflation but worried that President Donald Trump's tariff war with China will hobble economic growth, cut short-term interest rates for the third time this year.