July 5, 2022

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For the July-September quarter as a whole, consumer spending, which fuels about 70 percent of overall economic activity, weakened to an annual growth rate of just 1.6 percent. That was down significantly from the previous quarter.

Economists remain hopeful for a bounce-back in the current quarter, with confirmed COVID cases declining, vaccination rates rising, businesses investing and more Americans venturing out to spend money.

Many analysts think the economy will rebound at a solid annual growth rate of at least 4 percent this quarter.

In Friday’s report on consumer spending, the government said that last month’s 0.6 percent increase marked a slowdown from the 1 percent gain in August. Purchases of goods slowed to a 0.5 percent rise in September, compared with a 1.6 percent increase in August. More Americans have been shifting their spending away from the physical goods that many purchased while hunkered down at home to spending on services, from haircuts to airline tickets to restaurant meals.

In some cases, a shortage of products, related to bottlenecked supply chains, are keeping a lid on goods purchases.

The 12-month increase of 4.4 percent in a price gauge preferred by the Fed, the largest such rise since early 1991, reflected a continuation of the inflation pressures that have intensified in recent months.

So-called core inflation, which excludes volatile energy and food costs, rose by a slightly milder 3.6 percent over the past year.

Most economists expect consumer spending to strengthen as supply problems ease. The resilience of such spending has fueled businesses’ need for workers, and in many cases they can’t find enough.

In September, employers added just 194,000 jobs, a second straight tepid gain and a sign that the pandemic still had a grip on the economy with many companies struggling to attract applicants to fill jobs. Many people who lost jobs in the pandemic have yet to start looking again.

Lydia Boussour, lead U.S. economist at Oxford Economics, said she thinks that consumer spending, which slowed to an annual growth rate of just 1.6 percent in the July-September period, is rebounding in the current quarter.

“An improving health situation, rising mobility, improving employment trends and solid household finances,” Boussour wrote, should help fuel a consumer spending increase of around 5 percent this quarter.

The report Friday showed that the saving rate dipped to 7.5 percent of after-tax income in September, a still-high level but down from 9.2 percent in August.

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