WASHINGTON – U.S. consumer spending (search) rose 0.5 percent last month as post-hurricane insurance payments led to the biggest jump in income in 10 months, a government report showed on Monday.
Personal income (search) jumped 1.7 percent, the biggest rise since December 2004, as insurance payments in the wake of hurricanes Katrina and Rita rose at a $120 billion annual rate, the Commerce Department said.
The gain in spending matched expectations on Wall Street (search), but the increase in income handily outstripped forecasts for a 0.3 percent rise.
The income gain, however, followed a downwardly revised 0.9 percent drop in August that reflected plummeting rental and personal business income after the storms. Rental and proprietors' income declined again last month, but not as steeply.
While spending rose last month, the increase was more than accounted for by surging energy prices. Adjusted for inflation, spending fell 0.4 percent after a 1 percent August drop.
The department's inflation measure - closely watched by policy-makers at the Federal Reserve - shot up 0.9 percent, the biggest rise since February 1981.
But excluding food and energy, the so-called PCE price index advanced just 0.2 percent. Over the past year, this core price index has risen 2 percent, a level considered to be at the upper end of the Fed's comfort zone.
The data released on Monday was incorporated in a report on third-quarter economic growth released on Friday, which could lessen its value to financial markets trying to determine the direction of the economy and interest rates.
The saving rate - the percentage of after-tax income Americans sock away - remained in negative territory in September for a fourth straight month.
The department said the saving rate percentage was minus 0.4 last month, after bottoming out at a minus 1.8 in August.