WASHINGTON, Jan 22 (Reuters) – U.S. consumer spending increased solidly in November and October, likely keeping the economy on track for a third straight quarter of strong growth.
Consumer spending, which accounts for more than two-thirds of economic activity, rose 0.5% after rising by the same margin in October, the Commerce Department’s Bureau of Economic Analysis said on Thursday.
Economists polled by Reuters had forecast consumer spending increasing 0.5% in November. The combined October and November data was delayed by the 43-day government shutdown.
The BEA earlier on Thursday reported that the economy grew at a 4.4% annualized rate in the third quarter after expanding at a 3.8% pace in the April-June quarter. The Atlanta Federal Reserve is currently forecasting gross domestic product increasing at a 5.4% rate in the fourth quarter.
The economy is being mostly driven by consumer spending and a shrinking trade deficit as President Donald Trump’s sweeping tariffs curb imports. But the tariffs have raised prices for consumers, and economists say spending is being supported by higher-income households, while lower- and middle-income households face a limited ability to substitute purchases, creating what they called a K-shaped economy.
The bifurcated spending persisted in early January. The Federal Reserve’s Beige Book report last week said several districts noted “spending was stronger among higher-income consumers with increased spending on luxury goods, travel, tourism and experiential activities.”
GOVERNMENT SHUTDOWN DISTORTS INFLATION
Though inflation subsided in October and November, that was because the government shutdown injected a downside bias to prices. The government was unable to collect most of the data to compile the Consumer Price Index report for October. Similarly most data was unavailable for October’s import prices report.
These data gaps also impacted reports for November CPI and import prices. But the government was able to publish the Producer Price Index report for October. The Personal Consumption Expenditures price indexes, tracked by the U.S. central bank for its 2% target, are calculated using some of the data from the CPI, PPI and import prices reports.
“To replace the missing CPIs, BEA derived seasonally adjusted price indexes for October using the geometric mean of the September and November CPIs,” the BEA said. “BEA derived non-seasonally adjusted price indexes by applying seasonal adjustment factors from October 2024 to the imputed seasonally adjustedc values for October 2025.”
The PCE price index increased 0.2% in November, matching October’s gain. In the 12 months through November, the PCE Price Index climbed 2.8% after rising 2.7% in October.
Excluding the volatile food and energy components, the PCE price index 0.2% after by the same margin in October. In the 12 months through November, the so-called core inflation increased 2.8% after advancing 2.7% in October.
December CPI data have suggested core PCE picked up last month, with economists’ estimates as high as a 0.4% increase, which would translate to a year-on-year rise of 3.1%. December’s PCE inflation data will be released on February 20. The Fed is expected to keep interest rates unchanged later this month.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
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