US consumers keep spending briskly even in the face of persistent inflation and high interest rates

abcnews.go.com:

An inflation gauge that is closely monitored by the Federal Reserve showed price increases remained elevated in September amid brisk consumer spending and strong economic growth

WASHINGTON — An inflation gauge that is closely monitored by the Federal Reserve showed price increases remained elevated in September amid brisk consumer spending and strong economic growth.

Friday’s report from the Commerce Department showed that prices rose 0.4% from August to September, the same as the previous month. And compared with 12 months earlier, inflation was unchanged at 3.4%.

Taken as a whole, the figures the government issued Friday show a still-surprisingly resilient consumer, willing to spend briskly enough to power the economy even in the face of persistent inflation and high interest rates. Spread across the economy, the strength of that spending is itself helping to fuel inflation.

In a cautionary note, consumers relied increasingly on savings to fuel their shopping last month. Income growth slowed. Adjusted for inflation, income actually fell slightly.

Yet spending jumped 0.4%, after adjusting for inflation. The saving rate fell to 3.4%, down from the 6%-plus average before the pandemic.

“That is clearly unsustainable, and we expect spending growth will slow sharply in the quarters ahead,” said Michael Pearce, lead U.S. economist at Oxford Economics, a consulting firm.

September’s month-to-month price increase exceeds a pace consistent with the Fed’s 2% annual inflation target, and it compounds already higher costs for such necessities as rent, food and gas. The Fed is widely expected to keep its key short-term interest rate unchanged when it meets next week. But its policymakers have flagged the risk that stronger growth