Daily newsletter · Fri 30 Oct 2026
The US economy grew 3.4% last quarter, but September's spending went on higher prices
The US economy grew at an annualised 3.4% in the September quarter, the Commerce Department said on Thursday. That was faster than economists expected, and up from 2.2% in the June quarter.
So where did the money go? In September, most of it went on higher prices. Americans spent 0.5% more than in August, and prices rose 0.5% too. After inflation, spending barely moved.
Incomes are falling behind. Personal income rose only 0.2% in September, and income after tax and inflation fell 0.3%.
Inflation is also moving the wrong way for the Fed. The PCE price index, its preferred measure, rose 3.6% in the year to September, up from 3.4% in August. Core inflation, which leaves out food and energy, rose to 3.1%.
traders put the chance of a December Fed rise at 84.6% after Thursday's figures, up from 82.6% after Wednesday's decision. I'd want to see incomes catch up with prices before reading strong growth as a sign of a strong consumer. Until they do, the extra spending is coming out of savings.
More in
All stories →- Wednesday 11 November October's inflation report put a half-point rate rise back on the table
- Saturday 7 November America added 165,000 jobs in October, and the bond market heard a December rate rise
- Wednesday 4 November The Reserve Bank of Australia raised rates to a level Australians have not seen since 2008
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