US consumer spending was buoyant going into the holiday shopping season as inflationary pressures eased and fresh data yesterday showed Americans continuing to reach for their wallets.
Core inflation was flat for the first time in four years, while consumer spending accelerated, with a rise of 0.5 per cent last month following an increase of 0.2 per cent in October, according to government figures on personal income and expenditure.
The combination of cooling inflation and continued spending will be welcomed by the Federal Reserve, which is now more likely to keep interest rates on hold.
The Fed is expecting moderate economic growth next year as consumers remain confident, despite a downturn in the housing market.
The central bank views the risks to this outlook as finely balanced between a pick-up in inflation and a slowdown in growth.
The Fed's concern about inflation will be eased slightly by the unexpected fall in its favoured measure of prices, the core personal consumption expenditure deflator.
This indicator - which excludes volatile food and energy prices - showed no increase from the previous month, bringing the annual rate down to 2.2 per cent from 2.4 per cent in each of the preceding three months.
But there was less cheer for manufacturers, as inventories of big-ticket items continued to build and orders slowed in most sectors.
A rise in sales of aircraft and computers lifted durable goods orders by 1.9 per cent, but most of the rebound was confined to the transport sector, and demand across other industries fell 1.1 per cent.
