Consumer spending in the United States slowed down in September as inflation remained stubbornly high, according to the latest data released by the Commerce Department. This report, which had been delayed due to the government shutdown, is the last major inflation update before the Federal Reserve meets next week.
The Personal Consumption Expenditures (PCE) price index, the Fed’s preferred measure of inflation, rose 0.3% in September. This pushed annual inflation up to 2.8%, the highest rate since April 2024. Rising gas and food prices were major contributors.
Because food and energy prices often fluctuate, the Federal Reserve also looks closely at core PCE, which excludes both categories. Core PCE increased 0.2%, bringing annual core inflation down to 2.8%.
Economists had expected these numbers, predicting a small monthly rise and a slight increase in yearly inflation.
After strong spending in August, Americans pulled back in September. Consumer spending rose only 0.3%, and when adjusting for inflation, it showed almost no growth. According to analysts, many lower- and middle-income households are feeling strained as the cost of living remains high.
Consumer confidence has also taken a hit due to rising prices, economic uncertainty, and policy changes including high tariffs introduced by the Trump administration. Still, early signs suggest that shoppers are returning for the holiday season, offering some hope for the months ahead.
The University of Michigan’s Consumer Sentiment Index showed a slight improvement in early December, rising to 53.3, which was better than expected. Even so, sentiment remains near historic lows as Americans continue to struggle with higher prices
