U.S. consumer spending increased solidly in October, while inflation moderated, giving the economy a powerful boost at the start of the fourth quarter as it navigates a high interest rate environment.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, jumped 0.8% after an unrevised 0.6% increase in September, the Commerce Department said on Thursday. October's gain was in line with economists' expectations.
That intention was supported by a moderation in the inflation trend last month. The personal consumption expenditures price index rose 0.3 after advancing by the same margin in September. In the 12 months through October, the PCE price index increased 6.0% after advancing 6.3% in September. The Fed has raised its policy rate by 375 basis points this year from near zero to a 3.75%-4.00% range.A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits dropped 16,000 to a seasonally adjusted 225,000 for the week ended Nov. 26. That unwound some of the surge in the prior week, which had boosted claims.
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