US consumer spending rose for a fourth straight month in October and a key inflation gauge was at a record low, a government report showed today, strengthening the Federal Reserve's defence of its decision to loosen monetary policy further.
The Commerce Department said today spending rose 0.4 per cent after climbing by an upwardly revised 0.3 per cent in September.
Economists had expected spending, which accounts for about 70 per cent of US economic activity, to increase 0.5 per cent last month after a previously reported 0.2 per cent gain in September.
The Federal Reserve's preferred measure of consumer inflation - the personal consumption expenditures price index, excluding food and energy - was flat for a second straight month.
But in the 12 months through October, the core PCE index rose 0.9 per cent, the smallest since records started in 1960 and well below the US central bank's 1.7 per cent to 2 per cent comfort zone.
Though spending rose last month, it was still not robust. Concerns about low inflation and slow economic growth prompted the Fed this month to pump more money into the economy through additional purchases of $600 billion worth of government debt.
The asset purchasing program, also known as quantitative easing in financial markets, is intended to drive already ultra low interest rates further down and boost domestic demand.
Spending was lifted by a 0.5 per cent rise in incomes after being flat in September. The rise incomes, which was flagged by October's employment report, was a touch above market expectations for a 0.4 per cent gain.
Spending adjusted for inflation increased 0.3 per cent after rising 0.2 per cent in September. The sixth straight month of gains suggested consumers would continue to support the economy in the fourth quarter as the boost from inventory growth earlier in the year wanes.
Spending grew at a 2.8 per cent annual pace in the third quarter, the fastest rate since the fourth quarter of 2006.
With real disposable income rebounding 0.3 per cent, the saving rate edged up to 5.7 per cent from 5.6 per cent in September. Savings rose to an annual rate of $651.1 billion.