US consumer spending growth saw an acceleration in November, with the Federal Reserve's preferred inflation metric holding steady, as indicated by government data released on Friday. Personal consumption expenditures increased by 0.4% last month, compared to a previous rise of 0.3% in October, according to a report from the Bureau of Economic Analysis.
This growth, however, fell short of the Bloomberg-polled consensus that anticipated a 0.5% increase. Goods spending recorded a positive shift, rising by 0.8% due to gains in both durable and nondurable goods. Conversely, growth in services spending slowed down to 0.2%, down from 0.6% in the previous month.
BMO Senior Economist Sal Guatieri remarked, "Easing monetary policy, rising wealth, and sturdy income growth have laid a solid foundation for US consumers, while moderating inflation can only help." This sentiment reflects the ongoing stability as financial conditions gradually improve. The headline PCE price index showed a slight decrease to a 0.1% sequential gain in November, down from a 0.2% increase in October.
Year-over-year inflation increased to 2.4%, up from 2.3%. Wall Street had forecasted a 0.2% sequential growth and a 2.5% annualized price increase. The Fed's favorite core measure, which excludes food and energy, remained flat at an annual rate of 2.8% in November, experiencing a decrease from 0.3% to 0.1% on a sequential basis.
The market had projected 2.9% and 0.2% growth, respectively. Despite the recent cut of 25 basis points to the policy rate announced by the central bank on Wednesday, they stated that inflation remains "somewhat elevated," although progress has been made toward achieving the Federal Open Market Committee's (FOMC) 2% target.
The FOMC also hinted at fewer cuts being necessary than previously anticipated in September. According to the CME FedWatch tool, the market broadly expects the FOMC to maintain steady interest rates in January. Guatieri further noted, "Although a more cautious Fed will likely pass on lowering rates again in January, we continue to look for a move in March as inflation makes further progress toward the target.".