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The numbers: Americans are paying higher consumer prices due to surging inflation, but they are also buying plenty of goods and services to undergird a U.S. economy recovery, a new report showed.
Consumer spending climbed 1.3% last month, the government said Wednesday. Americans spent more on new cars and travel-related services in October.
Economists polled by The Wall Street Journal had forecast a 1% increase.
Higher prices accounted for about half of the gain, however. Consumer spending rose a more modest but still strong 0.7% after factoring in inflation.
Read: Consumer prices soar again and push U.S. rate of inflation to 31-year high
High inflation is likely to persist at least until the middle of next year. A measure of inflation included in the spending report rose again in October to push the increase over the past year to a 31-year high of 5%.
Incomes rose 0.5% last month, but inflation more than offset the increase.
Big picture: The U.S. economy suffered a minor blow toward the end of summer from the rapid spread of the coronavirus delta strain. Some people stopped going out as much and cut spending on services such as dining out or travel.
Households are still spending plenty of money, though, and a high savings rate suggests they have the ability to spend even more.
Not all of the spending is a sign of strong demand, however. The fastest increase in inflation in 30 years means Americans are paying more for products and services now than they were one year ago.
Also: The Fed has bet on a future of low inflation. Here’s what could go wrong
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
fell in Wednesday trades. Stocks have come off recent record highs.
